AGREEMENT AND PLAN OF REORGANIZATION

by and among

USA NETWORKS, INC.,

TICKETMASTER ONLINE-CITYSEARCH, INC.,

LYCOS, INC.,

USA INTERACTIVE INC., (TO BE RENAMED USA/LYCOS INTERACTIVE NETWORKS, INC.)

LEMMA, INC.

AND

TYCHO, INC.

________

DATED AS OF FEBRUARY 8, 1999

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TABLE OF CONTENTS -------------------AGREEMENT AND PLAN OF REORGANIZATION Page

ARTICLE I

THE MERGERS; CLOSING

1.1 1.2

The Mergers..................................................... The Closing.....................................................

2 2

ARTICLE II

DIRECTORS AND OFFICERS, CERTIFICATES OF INCORPORATION AND CERTAIN OTHER MATTERS

2.1 2.2 2.3

Directors....................................................... Officers........................................................

3 3 3

Certificate of Incorporation and By-Laws........................

ARTICLE III

EFFECT OF THE REORGANIZATION ON THE SECURITIES OF LYCOS, TMCS AND THE MERGER SUBSIDIARIES

3.1 3.2 3.3 3.4 3.5 3.6 3.7

Conversion of Common Stock...................................... Cancellation of Newco Stock..................................... Merger Subs Stock............................................... Lycos Options................................................... TMCS Class B Options............................................ TMCS Class A Options............................................ Tax Consequences................................................ 7 8 8 9 6 6

ARTICLE IV

EXCHANGE OF SHARES

4.1 4.2

Newco to Make Shares Available.................................. Exchange of Shares.............................................. 10

-i<PAGE> Page ---ARTICLE V

REPRESENTATIONS AND WARRANTIES OF TMCS

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

Corporate Organization.......................................... Capitalization.................................................. 13

13

Authority; No Violation......................................... Consents and Approvals.......................................... Financial Statements............................................ Broker's Fees................................................... 17

14 15 16

Absence of Certain Changes or Events............................ Legal Proceedings............................................... Taxes and Tax Returns........................................... 18 20 17 17

17

5.10 Employees....................................................... 5.11 SEC Reports.....................................................

5.12 Compliance with Applicable Law..................................

20

5.13 Intellectual Property; Proprietary Rights; Employee Restrictions 5.14 Certain Contracts............................................... 5.15 Undisclosed Liabilities......................................... 5.16 Insurance....................................................... 22 23 23 23 23 23 24 24 22 22

20

5.17 Environmental Liability......................................... 5.18 State Takeover Laws............................................. 5.19 Year 2000 Compliance............................................ 5.20 Certain Tax Matters............................................. 5.21 Registration Statement..........................................

5.22 Ownership of Lycos Capital Stock................................ 5.23 Opinion of Financial Advisors...................................

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF LYCOS

6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9

Corporate Organization.......................................... Capitalization.................................................. 25

24

Authority; No Violation......................................... Consents and Approvals.......................................... Financial Statements............................................ Broker's Fees................................................... 27

25 26 27

Absence of Certain Changes or Events............................ Legal Proceedings............................................... Taxes and Tax Returns........................................... 28 28

27

6.10 Employees....................................................... 6.11 SEC Reports.....................................................

29 30 31 31

6.12 Compliance with Applicable Law..................................

6.13 Intellectual Property; Proprietary Rights; Employee Restrictions

-ii<PAGE> Page ----

6.14 Certain Contracts............................................... 6.15 Undisclosed Liabilities......................................... 6.16 Insurance....................................................... 33

32 33

6.17 Environmental Liability......................................... 6.18 State Takeover Laws............................................. 6.19 Year 2000 Compliance............................................ 6.20 Certain Tax Matters............................................. 6.21 Registration Statement..........................................

33 33 33 34 34 34 34

6.22 Ownership of TMCS Capital Stock................................. 6.23 Opinion of Financial Advisors...................................

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF PARENT, NEWCO, L MERGER SUB AND T MERGER SUB

7.1 7.2 7.3 7.4 7.5 7.6

Representations and Warranties of Parent and Newco.............. Corporate Organization of Merger Subs........................... Capitalization.................................................. 35 35 36 36 35

34

Authority; No Violation......................................... Conduct of Business............................................. Broker's Fees...................................................

ARTICLE VIII

COVENANTS RELATING TO CONDUCT OF BUSINESS

8.1 8.2

Conduct of Businesses Prior to the Effective Time............... Forbearances.................................................... 36

36

ARTICLE IX

ADDITIONAL AGREEMENTS

9.1 9.2 9.3 9.4 9.5 9.6 9.7

Regulatory Matters.............................................. Access to Information........................................... No Solicitation................................................. 41

39 40

Stockholders' Approvals......................................... Legal Conditions to Merger...................................... Affiliates...................................................... 42

41 41

Nasdaq Quotation................................................

42

9.8 9.9

Employee Benefit Plans..........................................

42 43

Indemnification; Directors' and Officers' Insurance............. 44 44

9.10 Additional Agreements........................................... 9.11 Advice of Changes............................................... 9.12 Section 16...................................................... 44

-iii<PAGE> Page ----

9.13 Contribution Agreement.......................................... 9.14 Other Businesses................................................ 9.15 Affiliate Sales Agreement....................................... 45

44

45 46

9.16 Limitations on Sale of Parent Shares............................ 9.17 Promotion....................................................... 46

ARTICLE X

CONDITIONS PRECEDENT

10.1 Conditions to Each Party's Obligation to Effect the Mergers..... 10.2 Conditions to Obligations of Lycos.............................. 47 48

46

10.3 Conditions to Obligations of TMCS and Newco.....................

ARTICLE XI

TERMINATION AND AMENDMENT

11.1 Termination..................................................... 11.2 Effect of Termination........................................... 11.3 Amendment....................................................... 11.4 Extension; Waiver...............................................

48 49 49 50

ARTICLE XII

GENERAL PROVISIONS

12.1 Nonsurvival of Representations, Warranties and Agreements....... 12.2 Expenses........................................................ 12.3 Notices......................................................... 12.4 Interpretation.................................................. 12.5 Counterparts.................................................... 12.6 Entire Agreement................................................ 12.7 Governing Law................................................... 12.8 Publicity....................................................... 52 52 53 50 50 52 52 52 52

50

12.9 Assignment; Third Party Beneficiaries........................... 12.10 Standards; Disclosure Schedules.................................

Exhibit A - Form of Option Agreements

Exhibit B - Form of Certificate of Designations for Series A Convertible Redeemable Preferred Stock Exhibit 9.6(a) - Form of Affiliate Letter from Lycos Affiliates Exhibit 9.6(b) - Form of Affiliate Letter from TMCS Affiliates

Ticketmaster Online-CitySearch, Inc. Disclosure Schedule Lycos, Inc. Disclosure Schedule

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INDEX OF DEFINED TERMS

Section -------

Page No. --------

Agreement............................... CERCLA..................................

Preamble.......................... 5.17.............................. 23

Class A Exchange Ratio.................. Class B Exchange Ratio.................. Closing................................. Closing Date............................

3.1(b)............................ 3.1(c)............................ 2 2

4 4

1.2............................... 1.2...............................

Code....................................

3.4(b) ...........................

7 40

Confidentiality Agreement............... Contribution............................

9.2(b) ........................... 1

Recitals..........................

Contribution Agreement.................. DGCL....................................

Recitals.......................... 2 6 2 19 11

1.1(a) ...........................

Dissenting Share........................ Effective Time.......................... ERISA...................................

3.1(h) ........................... 1.1(c) ...........................

5.10(a) ..........................

Excess Class B Shares...................

4.2(e)............................

Excess Common Shares.................... Excess Shares........................... Exchange Act............................ Exchange Agent.......................... Exchange Fund........................... GAAP....................................

4.2(e)............................ 11 20 9 9

11

4.2(e)............................ 5.11.............................. 4.1............................... 4.1............................... 15

5.5...............................

Goldman Sachs...........................

5.6...............................

17 15 16

Government Approvals.................... Governmental Entity..................... HSN..................................... HSR Act.................................

5.4............................... 5.4............................... 45 15

9.15.............................. 5.4...............................

Indemnified Parties..................... Injunction..............................

9.9(a) ........................... 47

43

10.1(e) ..........................

Intellectual Property Rights............ IRS.....................................

5.13(a) .......................... 18 1

20

5.9(a) ...........................

L Merger Sub............................

Preamble .........................

Liens................................... LLC..................................... Lycos................................... Lycos 10-K..............................

5.2(b)............................ Recitals ......................... Recitals.......................... 6.5...............................

14 1 1 27 29 24 25 4 24 4

Lycos Benefit Plans..................... Lycos Bylaws............................ Lycos Capital Stock..................... Lycos Certificate....................... Lycos Charter...........................

6.10(a) .......................... 6.1(a) ........................... 6.2(a)............................ 3.1(d)............................ 6.1(a) ...........................

Lycos Common Exchange Ratio.............

3.1(a)............................

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Section -------

Page No. --------

Lycos Common Stock...................... Lycos Contract..........................

3.1(a) ........................... 32

6.14(a)...........................

Lycos Disclosure Schedule............... Lycos ERISA Affiliate................... Lycos Merger............................

Article VI........................ 29 1

24

6.10(a) .......................... Recitals..........................

Lycos Preferred Exchange Ratio.......... Lycos Preferred Stock................... Lycos Reports........................... Lycos Stock Plans....................... Material Adverse Effect................. Merger Subs............................. Mergers................................. NASD.................................... Nasdaq..................................

3.1(a) ........................... 25

6.2(a) ........................... 30

6.11 ............................. 6.2(a) ...........................

25 13 1

5.1(a) ...........................

Preamble.......................... 1.1(b) ........................... 4.2(e)............................ 4.2(e)............................ 2 11 11

New Benefit Plans....................... Newco...................................

9.8(a) ...........................

42 1 4 4 4 4

Preamble.......................... 3.1(b)............................

Newco Capital Stock.....................

Newco Class B Common Stock.............. Newco Common Stock......................

3.1(b)............................ 3.1(a)............................

Newco Convertible Preferred Stock....... Option Agreements....................... Parent..................................

3.1(a)............................ 1

Recitals.......................... 1

Preamble..........................

Parent Sunset Threshold................. Proxy/Information Statement............. Requisite Regulatory Approvals.......... Reorganization.......................... S-4..................................... SEC.....................................

9.14(b)........................... 5.4............................... 10.1(c) .......................... 1

45 15 46

Recitals.......................... 15 15 20

5.4............................... 5.4...............................

Securities Act..........................

5.11..............................

Section 16 Securities...................

9.12..............................

44

Shares Trust............................ Subsidiary..............................

4.2(e)............................ 5.1(a)............................

12 13 1 1

Surviving Corporation................... T Merger Sub............................ Tax(es)................................. TMCS....................................

Recitals.......................... Preamble ......................... 18 1

5.9(b) ...........................

Preamble.......................... 5.5............................... 5.10(a) .......................... 5.1(a) ........................... 5.2(a) ........................... 5.1(a) ........................... 3.1(f) ...........................

TMCS Balance Sheet...................... TMCS Benefit Plans...................... TMCS Bylaws............................. TMCS Capital Stock...................... TMCS Charter............................

16 18 13 14 13 5 4

TMCS Class A Certificate................

TMCS Class A Common Stock............... TMCS Class B Certificate................

3.1(b) ........................... 5

3.1(e) ...........................

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Section -------

Page No. --------

TMCS Class B Common Stock...............

3.1(c) ...........................

TMCS Contract...........................

5.14(a)...........................

22 13

TMCS Disclosure Schedule................ TMCS ERISA Affiliate.................... TMCS Merger.............................

ArticleV.......................... 19 1

5.10(a)........................... Recitals..........................

TMCS Preferred Exchange Ratio........... TMCS Preferred Stock.................... TMCS Prospectus......................... TMCS Reports............................ TMCS Stock Plans........................ Transactions............................ Wasserstein Perella.....................

3.1(c)............................ 13 16 20 14 1 27

5.2(a) ........................... 5.5...............................

5.11.............................. 5.2(a) ........................... Recitals.......................... 6.6...............................

Wired Merger Agreement..................

6.2(a) ...........................

25

-vii<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION

AGREEMENT AND PLAN OF REORGANIZATION, dated as of February 8, 1999 (this "Agreement"), by and among USA Networks, Inc., a Delaware corporation ("Parent"), Ticketmaster Online-CitySearch, Inc., a Delaware corporation ("TMCS"), Lycos, Inc., a Delaware corporation ("Lycos") , USA Interactive Inc., a Delaware corporation ("Newco"), Lemma, Inc., a Delaware corporation ("L Merger Sub"), and Tycho, Inc., a Delaware corporation ("T Merger Sub" and together with L Merger Sub, the "Merger Subs").

WITNESSETH: ----------

WHEREAS, the Boards of Directors of Parent, Lycos, Newco, L Merger Sub and T Merger Sub have determined that it is in the best interests of their respective companies and their stockholders to consummate the strategic business combination transaction provided for herein in which (i) T Merger Sub, a wholly owned subsidiary of Newco, will, subject to the terms and conditions set forth

herein, merge with and into TMCS (the "TMCS Merger"), so that TMCS is the surviving corporation in the TMCS Merger, and (ii) L Merger Sub will, subject to the terms and conditions set forth herein, merge with and into Lycos (the "Lycos Merger" and, together with the TMCS Merger, the "Reorganization"), so that Lycos is the surviving corporation in the Lycos Merger (each of Lycos and TMCS herein sometimes referred to in its capacity as the surviving corporation in the Lycos Merger and the TMCS Merger, respectively, the "Surviving Corporation"); and

WHEREAS, as a condition to, and simultaneously with, the execution of this Agreement, Parent, Newco and USANi LLC, a Delaware limited liability company ("LLC"), are entering into a contribution agreement (the "Contribution Agreement") that provides for the contribution of certain businesses of Parent and its Subsidiaries to Newco (the "Contribution" and, together with the Reorganization, the "Transactions"); and

WHEREAS, as a condition to, and simultaneously with, the execution of this Agreement, Parent and TMCS are each entering into a stock option agreement with Lycos with respect to shares of common stock of Lycos in the forms attached hereto as Exhibit A (the "Option Agreements"); and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Mergers and also to prescribe certain conditions to the Mergers.

NOW, THEREFORE, in consideration of the mutual covenants,

representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows:

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ARTICLE I

THE MERGERS; CLOSING

1.1 The Mergers. Subject to the terms and conditions of this Agreement, at the Effective Time:

(a) L Merger Sub shall be merged with and into Lycos in accordance with the applicable provisions of the General Corporation Law of the State of Delaware (the "DGCL"). Lycos shall be the surviving corporation in the Lycos Merger and shall continue its corporate existence under the laws of the State of Delaware. As a result of the Lycos Merger, Lycos shall become a wholly owned Subsidiary of Newco and the separate corporate existence of L Merger Sub shall terminate. The Lycos Merger shall have the effects and consequences specified in Sections 259 and 261 of the DGCL .

(b) T Merger Sub will be merged with and into TMCS in accordance with the applicable provisions of the DGCL. TMCS shall be the surviving corporation in the TMCS Merger and shall continue its corporate existence under the laws of

the State of Delaware. As a result of the TMCS Merger, TMCS shall become a wholly owned Subsidiary of Newco and the separate corporate existence of T Merger Sub shall terminate. The TMCS Merger shall have the effects and consequences specified in Sections 259 and 261 of the DGCL. The term "Mergers" shall mean the Lycos Merger and the TMCS Merger.

(c) The term "Effective Time" shall mean the time and date which is the later of (i) the date and time of the filing of the certificate of merger relating to the Lycos Merger with the Secretary of State of the State of Delaware (or such other date and time as may be specified in such certificate as may be permitted by Delaware law) and (ii) the date and time of the filing of a certificate of merger with the Secretary of State of the State of Delaware with respect to the TMCS Merger (or such other date and time as may be specified in such certificate as may be permitted by Delaware law).

1.2 The Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place (a) at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, at 10:00 a.m., local time, on the third business day following the day on which the last to be fulfilled or waived of the conditions set forth in Article X shall be fulfilled or waived in accordance herewith or (b) at such other time, date or place as Parent, Lycos and TMCS may agree. The date on which the Closing occurs is hereinafter referred to as the "Closing Date."

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ARTICLE II

DIRECTORS AND OFFICERS, CERTIFICATES OF INCORPORATION AND CERTAIN OTHER MATTERS

2.1 Directors. The Board of Directors of Newco at the Effective Time shall consist of a majority of directors appointed by Parent, the Chief Executive Officer of Lycos, the Chief Financial Officer of Lycos and one additional director, who shall serve for at least a one-year term, to be selected prior to the Closing by the mutual agreement of Lycos and Parent, such agreement not to be unreasonably withheld. The directors of Lycos Merger Sub immediately prior to the Effective Time shall be the directors of the surviving corporation of the Lycos Merger as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law. The directors of T Merger Sub immediately prior to the Effective Time shall be the directors of the surviving corporation of the TMCS Merger as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law.

2.2 Officers. At the Effective Time, the Chief Executive Officer of

Parent shall be Chairman of the Board of Directors of Newco, the Chief Executive Officer of Lycos shall be Chief Executive Officer of Newco and the Chief Financial Officer of Lycos shall be Chief Financial Officer of Newco, in each case, until their successors are duly appointed or elected in accordance with applicable law. The officers of Lycos and TMCS immediately prior to the Effective Time shall be the officers of the surviving corporations of the Lycos Merger and the TMCS Merger, respectively, as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law.

2.3 Certificate of Incorporation and By-Laws. At the Effective Time, the Certificate of Incorporation and By-Laws of Newco shall be amended to (a) change the name of Newco to "USA/Lycos Interactive Networks, Inc." and (b) to provide that at such time as Parent, the LLC and their respective Subsidiaries no longer own a number of shares of Newco Common Stock or Newco Class B Common Stock at least equal to the Parent Sunset Threshold, all shares of Newco Class B Common Stock owned directly or indirectly by such entities shall be promptly exchanged for an equal number of shares of Newco Common Stock pursuant to the Newco Certificate of Incorporation, provided that any such exchange shall be postponed in order to comply with applicable securities laws and not to cause Parent, LLC or their respective Subsidiaries adverse tax consequences. Such amendments shall be reasonably satisfactory to Parent, Lycos and TMCS. At the Effective Time, the Certificate of Incorporation and By-Laws of the Surviving Corporation in the Lycos Merger and the TMCS Merger, respectively, shall be amended to provide for substantially identical terms as the Certificate of

Incorporation and By-Laws of L Merger Sub and T Merger Sub, respectively, immediately prior to the Effective Time and such Certificates of Incorporation and By-Laws of the Surviving Corporations, respectively, as so amended, shall be the Certificate and By-Laws of the Surviving Corporation in the Lycos Merger and the TMCS Merger, respectively, in each case, until thereafter amended in accordance with applicable law.

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ARTICLE III

EFFECT OF THE REORGANIZATION ON THE SECURITIES OF LYCOS, TMCS AND THE MERGER SUBSIDIARIES

3.1 Conversion of Common Stock. At the Effective Time, by virtue of the Lycos Merger and the TMCS Merger and without any action on the part of Lycos, TMCS, Newco or the holder of any of the following securities:

(a) Subject to Section 4.2(e), each share of common stock, par value $.01 per share, of Lycos ("Lycos Common Stock") issued and outstanding immediately prior to the Effective Time, except for shares of Lycos Common Stock owned by Lycos as treasury stock or owned, directly or indirectly, by Lycos, L Merger Sub, TMCS, T Merger Sub, Newco or any of their respective wholly owned

subsidiaries, shall be converted into the right to receive (i) 1.0 share (the "Lycos Common Exchange Ratio") of common stock, par value $.01 per share, of Newco ("Newco Common Stock") and (ii) 0.2963 of a share (the "Lycos Preferred Exchange Ratio") of Series A Convertible Redeemable Preferred Stock, par value $.01 per share, of Newco ("Newco Convertible Preferred Stock"), with the designations, powers, preferences, rights and qualifications, limitations and restrictions substantially as set forth in Exhibit B hereto.

(b) Subject to Section 4.2(e), each share of Class A common stock, par value $.01 per share, of TMCS ("TMCS Class A Common Stock") issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive 0.4464 of a share (the "Class A Exchange Ratio") of Class B common stock, par value $.01 per share, of Newco (the "Newco Class B Common Stock" and together with Newco Common Stock and Newco Convertible Preferred Stock, "Newco Capital Stock").

(c) Subject to Section 4.2(e), each share of the Class B common stock, par value $.01 per share, of TMCS ("TMCS Class B Common Stock") issued and outstanding immediately prior to the Effective Time, except for shares of TMCS Class B Common Stock owned by TMCS as treasury stock or owned, directly or indirectly, by TMCS, T Merger Sub, Lycos, L Merger Sub, Newco or any of their respective wholly owned subsidiaries, shall be converted into the right to receive (i) 0.4464 of a share (the "Class B Exchange Ratio") of Newco Common Stock and (ii) 0.0584 of a share of Newco Convertible Preferred Stock (the "TMCS Preferred Exchange Ratio").

(d) All of the shares of Lycos Common Stock converted into the right to receive Newco Common Stock and Newco Convertible Preferred Stock pursuant to this Article III shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate (each a "Lycos Certificate") previously representing any such shares of Lycos Common Stock shall thereafter represent only the right to receive a certificate representing the number of whole shares of Newco Common Stock, cash in lieu of fractional shares and a certificate representing the number of shares of Newco Convertible Preferred Stock into which the shares of Lycos Common Stock represented by such Lycos Certificate have been converted pursuant to this Section 3.1 and Section 4.2(e). Lycos Certificates previously repre-

-4<PAGE>

senting shares of Lycos Common Stock shall be exchanged for certificates representing whole shares of Newco Common Stock, cash in lieu of fractional shares and certificates representing shares of Newco Convertible Preferred Stock issued in consideration therefor upon the surrender of such Lycos Certificates in accordance with Section 4.2, without any interest thereon. If, prior to the consummation of the Lycos Merger, the outstanding shares of Lycos Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization,

recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to each of the Lycos Common Exchange Ratio and the Lycos Preferred Exchange Ratio.

(e) All of the shares of TMCS Class B Common Stock converted into the right to receive Newco Common Stock and Newco Convertible Preferred Stock pursuant to this Article III shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate (each a "TMCS Class B Certificate") previously representing any such shares of TMCS Class B Common Stock shall thereafter represent only the right to receive a certificate representing the number of whole shares of Newco Common Stock, cash in lieu of fractional shares of Newco Common Stock and a certificate representing the number of shares of Newco Convertible Preferred Stock into which the shares of TMCS Class B Common Stock represented by such TMCS Class B Certificate have been converted pursuant to this Section 3.1 and Section 4.2(e). TMCS Class B Certificates previously representing shares of TMCS Class B Common Stock shall be exchanged for certificates representing whole shares of Newco Common Stock, cash in lieu of fractional shares and certificates representing shares of Newco Convertible Preferred Stock issued in consideration therefor upon the surrender of such TMCS Class B Certificates in accordance with Section 4.2, without any interest thereon. If, prior to the consummation of the TMCS Merger, the outstanding shares of TMCS Class B Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization,

reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to each of the Class B Exchange Ratio and the TMCS Preferred Exchange Ratio.

(f) All of the shares of TMCS Class A Common Stock converted into the right to receive Newco Class B Common Stock pursuant to this Article III shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate (each a "TMCS Class A Certificate") previously representing any such shares of TMCS Class A Common Stock shall thereafter represent only the right to receive a certificate representing the number of whole shares of Newco Class B Common Stock and cash in lieu of fractional shares into which the shares of TMCS Class A Common Stock represented by such TMCS Class A Certificate have been converted pursuant to this Section 3.1 and Section 4.2(e). TMCS Class A Certificates previously representing shares of TMCS Class A Common Stock shall be exchanged for certificates representing whole shares of Newco Class B Common Stock and cash in lieu of fractional shares issued in consideration therefor upon the surrender of such TMCS Class A Certificates in accordance with Section 4.2, without any interest thereon. If, prior to the consummation of the TMCS Merger, the outstanding shares of TMCS Class A

-5<PAGE>

Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to the Class A Exchange Ratio.

(g) At the Effective Time, (i) all shares of Lycos Common Stock that are owned, directly or indirectly, by Lycos, TMCS, T Merger Sub, Newco or any of their respective wholly owned Subsidiaries (other than L Merger Sub) shall be cancelled and shall cease to exist and no stock of Newco or other consideration shall be delivered in exchange therefor and (ii) all shares of TMCS Class B Common Stock that are owned, directly or indirectly, by Lycos, TMCS, L Merger Sub or Newco or any of their respective wholly owned Subsidiaries (other than T Merger Sub) shall be cancelled and shall cease to exist and no stock of Newco or other consideration shall be delivered in exchange therefor. At the Effective Time, (i) all shares of Lycos Common Stock that are owned by L Merger Sub or any of its wholly owned Subsidiaries shall as of the Effective Time become treasury shares of Lycos Common Stock and (ii) all shares of TMCS Class B Common Stock that are owned by T Merger Sub or any of its wholly owned Subsidiaries shall as of the Effective Time become treasury shares of TMCS Class B Common Stock.

(h) Notwithstanding anything in this Agreement to the contrary, with respect to each share of TMCS Class A Common Stock as to which the holder thereof shall have properly complied with the provisions of Section 262 of the

DGCL as to appraisal rights (each a "Dissenting Share"), such holder will be entitled to payment, solely from the surviving corporation of the TMCS Merger, of the appraised value of such Dissenting Shares to the extent permitted by and in accordance with the provisions of Section 262 of the DGCL; provided, however, that (i) if any holder of Dissenting Shares, under the circumstances permitted by the DGCL, affirmatively withdraws his or her demand for appraisal of such Dissenting Shares, (ii) if any holder fails to establish his or her entitlement to rights to payment as provided in such Section 262, or (iii) if neither any holder of Dissenting Shares nor the surviving corporation has filed a petition demanding a determination of the value of all Dissenting Shares within the time provided in such Section 262, such holder will forfeit such right to payment for such Dissenting Shares pursuant to Section 262 and, as of the later of the Effective Time or the occurrence of such event, such holder's TMCS Class A Certificate will automatically be converted into and represent only the right to receive the consideration to which such holder would have been entitled pursuant to the TMCS Class A Exchange Ratio, without any interest thereon, upon surrender of such TMCS Class A Certificate.

3.2 Cancellation of Newco Stock. At the Effective Time, each share of the capital stock of Newco issued and outstanding immediately prior to the Effective Time shall be cancelled and shall cease to exist.

3.3 Merger Subs Stock. At the Effective Time, each share of common stock of L Merger Sub outstanding immediately prior to the Effective Time shall be converted into and shall become one share of common stock of the Surviving

Corporation of the Lycos Merger. At the Effective Time, each share of common stock of T Merger Sub outstanding immediately prior

-6<PAGE>

to the Effective Time shall be converted into and shall become one share of common stock of the Surviving Corporation of the TMCS Merger.

3.4 Lycos Options. (a) At the Effective Time, each option granted by Lycos to purchase shares of Lycos Common Stock which is outstanding and unexercised immediately prior thereto shall cease to represent a right to acquire shares of Lycos Common Stock and shall be converted automatically into an option to purchase shares of Newco Common Stock and shares of Newco Convertible Preferred Stock in an amount, at an exercise price and on the vesting schedule determined as provided below (and otherwise subject to the terms of the Lycos Stock Plans, as the case may be, and the agreements evidencing grants thereunder):

(i) The number of shares of Newco Common Stock and of Newco Convertible Preferred Stock, respectively, to be subject to the new option shall be equal to (A) the product of the number of shares of Lycos Common Stock subject to the original option and the Lycos Common Exchange Ratio and (B) the product of the number of shares of Lycos

Common Stock subject to the original option and the Lycos Preferred Exchange Ratio, provided that any fractional shares of Newco Common Stock or Newco Convertible Preferred Stock resulting from such calculations shall be rounded to the nearest whole share.

(ii) The exercise price for the combination of one share of Newco Common Stock and a number of shares of Newco Convertible Preferred Stock equal to the ratio of the Lycos Preferred Exchange Ratio to the Lycos Common Exchange Ratio under the new option shall be equal to the exercise price per share of Lycos Common Stock under the original option divided by the Lycos Common Exchange Ratio, provided that such exercise price shall be rounded to the nearest whole cent.

(iii) Each vesting date with respect to any such option or portion thereof (other than those held by the Chief Executive Officer of Lycos and the Chief Financial Officer of Lycos pursuant to employment agreements dated as of the date hereof), to the extent such date has not occurred prior to the Effective Time, shall be deemed to be a date that is six months earlier than the original vesting date for such option or portion thereof.

(b) The adjustment provided herein with respect to any options which are "incentive stock options" (as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")), shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code. The duration

and other terms of the new option shall be the same as the original option except that all references to Lycos shall be deemed to be references to Newco.

(c) Notwithstanding anything to the contrary in this Section 3.4, each of Lycos and Newco agrees to cooperate from and after the date hereof and before the Effective Time to effect such amendments to the Lycos Stock Plans and the agreements evidencing options thereunder so that each option converted pursuant to this Section 3.4 shall be, if exercised following the period for conversion of the Newco Convertible Preferred Stock, exercisable for such additional shares of Newco Common Stock as the holder thereof would have been entitled to receive in respect of a share of Newco Convertible Preferred Stock covered by such option had such option been ex-

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ercised and such share of Newco Convertible Preferred Stock converted during such period for conversion.

3.5 TMCS Class B Options. (a) At the Effective Time, each option granted by TMCS to purchase shares of TMCS Class B Common Stock which is outstanding and unexercised immediately prior thereto shall cease to represent a right to acquire shares of TMCS Class B Common Stock and shall be converted automatically into an option to purchase shares of Newco Common Stock and of

Newco Convertible Preferred Stock in an amount and at an exercise price determined as provided below (and otherwise subject to the terms of the TMCS Stock Plans, as the case may be, and the agreements evidencing grants thereunder):

(i) The number of shares of Newco Common Stock and of Newco Convertible Preferred Stock, respectively, to be subject to the new option shall be equal to (A) the product of the number of shares of TMCS Class B Common Stock subject to the original option and the Class B Exchange Ratio and (B) the product of the number of shares of TMCS Class B Common Stock subject to the original option and the TMCS Preferred Exchange Ratio, provided that any fractional shares of Newco Common Stock or of Newco Convertible Preferred Stock resulting from such calculations shall be rounded to the nearest whole share; and

(ii) The exercise price for the combination of one share of Newco Common Stock and a number of shares of Newco Convertible Preferred Stock equal to the ratio of the TMCS Preferred Exchange Ratio to the Class B Exchange Ratio under the new option shall be equal to the exercise price per share of TMCS Class B Common Stock under the original option divided by the TMCS Common Exchange Ratio, provided that such exercise price shall be rounded to the nearest whole cent.

(b) The adjustment provided herein with respect to any options which are "incentive stock options" shall be and is intended to be effected in a

manner which is consistent with Section 424(a) of the Code. The duration and other terms of the new option shall be the same as the original option except that all references to TMCS shall be deemed to be references to Newco.

(c) Notwithstanding anything to the contrary in Section 3.5(a) or 3.6(a), each of Newco and TMCS agrees to cooperate from and after the date hereof and before the Effective Time to effect such amendments to the TMCS Stock Plans and the agreements evidencing options thereunder so that each option to purchase TMCS Class B Common Stock or TMCS Class A Common Stock converted pursuant to Section 3.5(a) or 3.6(a) shall be, if exercised following the period for conversion of the Newco Convertible Preferred Stock, exercisable for such additional shares of Newco Common Stock as the holder thereof would have been entitled to receive in respect of a share of Newco Convertible Preferred Stock covered by such option had such option been exercised and such share of Newco Convertible Preferred Stock converted on the Conversion Date (as such term is defined in Exhibit B hereto).

3.6 TMCS Class A Options. (a) At the Effective Time, each option granted by TMCS to purchase shares of TMCS Class A Common Stock which is outstanding and unexer-

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cised immediately prior thereto shall cease to represent a right to acquire shares of TMCS Class A Common Stock and shall be converted automatically into an option to purchase shares of Newco Common Stock and Newco Convertible Preferred Stock in an amount and at an exercise price determined as provided below (and otherwise subject to the terms of the TMCS Stock Plans, as the case may be, and the agreements evidencing grants thereunder):

(i) The number of shares of Newco Common Stock and Newco Convertible Preferred Stock, respectively, to be subject to the new option shall be equal to (A) the product of the number of shares of TMCS Class A Common Stock subject to the original option and the Class B Exchange Ratio and (B) the product of the number of shares of TMCS Class A Common Stock subject to the original option and the TMCS Preferred Exchange Ratio, provided that any fractional shares of Newco Common Stock and Newco Convertible Preferred Stock resulting from such calculations shall be rounded to the nearest whole share; and

(ii) The exercise price for the combination of one share of Newco Common Stock and a number of shares of Newco Convertible Preferred Stock equal to the ratio of the TMCS Preferred Exchange Ratio to the Class B Exchange Ratio under the new option shall be equal to the exercise price per share of TMCS Class A Common Stock under the original option divided by the Class B Exchange Ratio, provided that such exercise price shall be rounded to the nearest whole cent.

(b) The adjustment provided herein with respect to any options which are "incentive stock options" shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code. The duration and other terms of the new option shall be the same as the original option except that all references to TMCS shall be deemed to be references to Newco.

3.7 Tax Consequences. It is intended that each of the Lycos Merger and the TMCS Merger shall constitute a "reorganization" within the meaning of Section 368(a) of the Code, that this Agreement shall constitute a "plan of reorganization" for the purposes of Sections 354 and 361 of the Code and that the Reorganization and the Contribution, taken together, shall constitute an exchange of the kind described in Section 351 of the Code.

ARTICLE IV

EXCHANGE OF SHARES

4.1 Newco to Make Shares Available. At or prior to the Effective Time, Newco shall deposit, or shall cause to be deposited, with a bank or trust company designated by Newco and reasonably acceptable to Lycos and TMCS (the "Exchange Agent"), for the benefit of the holders of Lycos Certificates, TMCS Class A Certificates and TMCS Class B Certificates, for exchange in accordance with this Article IV, certificates representing the shares of Newco Common Stock, Newco Class B Common Stock, and Newco Convertible Preferred Stock (such

certificates, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund"), to be issued pursuant to Section 3.1 and paid pursuant to Section 4.2(a) in

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exchange for outstanding shares of Lycos Common Stock, TMCS Class A Common Stock and TMCS Class B Common Stock, as the case may be.

4.2 Exchange of Shares. (a) As soon as practicable after the Effective Time, and in no event later than five business days thereafter, the Exchange Agent shall mail to each holder of record of one or more Lycos Certificates, TMCS Class A Certificates and TMCS Class B Certificates a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to such certificates shall pass, only upon delivery of the certificates to the Exchange Agent) and instructions for use in effecting the surrender of such certificates in exchange for certificates representing the shares of Newco Common Stock, Newco Class B Common Stock, Newco Convertible Preferred Stock, as the case may be, and any cash in lieu of fractional shares into which the shares represented by such certificate or certificates shall have been converted pursuant to this Agreement. Upon proper surrender of a Lycos Certificate, TMCS Class A Certificate or TMCS Class B Certificate or Certificates, as the case may be, for exchange and cancellation to the Exchange Agent, together with such

properly completed letter of transmittal, duly executed, and any other required documents the holder of such certificate or certificates shall be entitled to receive in exchange therefor, as applicable, (i) a certificate representing that number of whole shares of Newco Common Stock and a certificate representing that number of shares of Newco Convertible Preferred Stock, in the case of a holder of Lycos Common Stock or a holder of TMCS Class B Common Stock, or a certificate representing that number of whole shares of Newco Class B Common Stock, in the case of a holder of TMCS Class A Common Stock, in each case, to which such holder shall have become entitled pursuant to the provisions of Article III and (ii) a check representing the amount of any cash in lieu of fractional shares which such holder has the right to receive in respect of the certificate or certificates surrendered pursuant to the provisions of this Article IV, and the certificate or certificates so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any cash in lieu of fractional shares or on any unpaid dividends and distributions payable to holders of such certificates.

(b) No dividends or other distributions declared with respect to Newco Common Stock, Newco Class B Common Stock or Newco Convertible Preferred Stock and payable to holders of record thereof after the Effective Time shall be paid to the holder of any unsurrendered Lycos Certificate, TMCS Class A Certificate or TMCS Class B Certificate until the holder thereof shall surrender such certificate in accordance with this Article IV. After the surrender of such a certificate in accordance with this Article IV, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of

Newco Common Stock, Newco Class B Common Stock and Newco Convertible Preferred Stock represented by such certificate.

(c) If any certificate representing shares of Newco Common Stock, Newco Class B Common Stock or Newco Convertible Preferred Stock is to be issued in a name other than that in which the certificate or certificates surrendered in exchange therefor is or are registered, it shall be a condition of the issuance thereof that the certificate or certificates so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of a certificate

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representing shares of Newco Common Stock, Newco Class B Common Stock or Newco Convertible Preferred Stock in any name other than that of the registered holder of the certificate or certificates surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable.

(d) After the Effective Time, there shall be no transfers on the stock transfer books of Lycos of the shares of Lycos Common Stock, or on the stock

transfer books of TMCS of shares of TMCS Class A Common Stock or TMCS Class B Common Stock, in each case, that were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, certificates representing such shares are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for certificates representing shares of Newco Common Stock, or Newco Class B Common Stock and Newco Convertible Preferred Stock, in each case, as provided in this Article IV.

(e) No Issuance of Fractional Shares

(i) No certificates or scrip for fractional shares of Newco Common Stock or Newco Class B Common Stock shall be issued upon the surrender for exchange of Lycos Certificates, TMCS Class A Certificates or TMCS Class B Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any rights as a stockholder of Newco.

(ii) As promptly as practicable following the Effective Time, the Exchange Agent shall determine (A) the excess of the number of full shares of Newco Common Stock delivered to the Exchange Agent by Newco pursuant to Section 4.1 over the aggregate number of full shares of Newco Common Stock to be distributed to holders of Lycos Common Stock and TMCS Class B Common Stock pursuant to Section 4.2(a) (such excess being herein called the "Excess Common Shares") and (B) the excess of the number of full shares of Newco Class B Common Stock delivered to

the Exchange Agent by Newco pursuant to Section 4.1 over the aggregate number of full shares of Newco Class B Common Stock to be distributed to holders of TMCS Class A Common Stock pursuant to Section 4.2(a) (such excess being herein called the "Excess Class B Shares" and, together with the Excess Common Shares, the "Excess Shares"). As soon after the Effective Time as practicable, the Exchange Agent, as agent for the holders of Newco Common Stock and Newco Class B Common Stock, as the case may be, shall sell the Excess Common Shares and Excess Class B Shares at then prevailing prices for Newco Common Stock (it being understood that the Excess Class B Shares shall first be converted pursuant to their terms to shares of Newco Common Stock prior to such sale) on the Nasdaq National Market tier of The Nasdaq Stock Market ("Nasdaq"), all in the manner provided in paragraph (iii) of this Section 4.2(e).

(iii) The sale of the Excess Shares by the Exchange Agent shall be executed on Nasdaq by one or more member firms of the National Association of Securities Dealers, Inc. (the "NASD") and shall be executed in round lots to the extent practicable. Until the net proceeds of such sale or sales have been distributed to the holders of Newco

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Common Stock or Newco Class B Common Stock, as the case may be, the Exchange Agent shall hold such proceeds in trust for the holders of such stock (the "Shares Trust"). Newco shall pay all commissions, transfer taxes and other out-of-pocket transaction costs, including the expenses and compensation of the Exchange Agent incurred in connection with such sale of the Excess Shares. The Exchange Agent shall determine the portion of the Shares Trust to which each holder of Newco Common Stock or Newco Class B Common Stock shall be entitled, if any, by multiplying the amount of the aggregate net proceeds comprising the Shares Trust by a fraction, the numerator of which is the amount of the fractional share interest to which such holder of Newco Common Stock or Newco Class B Common Stock, as applicable, is entitled and the denominator of which is the aggregate amount of fractional share interests to which all holders of Newco Common Stock or Newco Class B Common Stock, as applicable, are entitled.

(iv) As soon as practicable after the determination of the amount of cash, if any, to be paid to the holders of Newco Common Stock and Newco Class B Common Stock, as the case may be, in lieu of fractional share interests, the Exchange Agent shall make available such amounts to such holders, net of any applicable withholding tax.

(f) Any portion of the Exchange Fund that remains unclaimed by the stockholders of Lycos or TMCS for 12 months after the Effective Time shall be

paid to Newco. Any former stockholders of Lycos or TMCS who have not theretofore complied with this Article IV shall thereafter look only to Newco for payment of the shares of Newco Common Stock, Newco Class B Common Stock, Newco Convertible Preferred Stock, cash in lieu of any fractional shares and any unpaid dividends and distributions on Newco Common Stock, Newco Class B Common Stock or Newco Convertible Preferred Stock deliverable in respect of each share of Lycos Common Stock, TMCS Class A Common Stock or TMCS Class B Common Stock, as the case may be, such stockholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of Lycos, TMCS, Newco, the Exchange Agent or any other person shall be liable to any former holder of shares of Lycos Common Stock, TMCS Class A Common Stock or TMCS Class B Common Stock for any amount delivered in good faith to a public official pursuant to applicable abandoned property, escheat or similar laws.

(g) In the event any Lycos Certificate, TMCS Class A Certificate or TMCS Class B Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if reasonably required by Newco, the posting by such person of a bond in such amount as Newco may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed certificate the shares of Newco Common Stock, Newco Class B Common Stock, Newco Convertible Preferred Stock and any cash in lieu of fractional shares deliverable in respect thereof pursuant to this Agreement.

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF TMCS

Except as disclosed in the TMCS disclosure schedule delivered to Lycos and Newco concurrently herewith (the "TMCS Disclosure Schedule") and subject to the standard set forth in Section 12.10, TMCS hereby represents and warrants to Lycos and Newco as follows:

5.1 Corporate Organization. (a) TMCS is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. TMCS has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not, either individually or in the aggregate, have a Material Adverse Effect on TMCS. As used in this Agreement, the term "Material Adverse Effect" means, with respect to Lycos or TMCS, as the case may be, a material adverse effect on (i) the business, operations, results of operations or financial

condition of such party and its Subsidiaries taken as a whole or (ii) the ability of such party to timely consummate the transactions contemplated hereby. As used in this Agreement, the word "Subsidiary" when used with respect to any party, means any corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, which is consolidated with such party for financial reporting purposes. True and complete copies of the Amended and Restated Certificate of Incorporation of TMCS ( the "TMCS Charter") and Amended and Restated By-Laws of TMCS (the "TMCS Bylaws"), as in effect as of the date of this Agreement, have previously been made available by TMCS to Newco and Lycos.

(b) Each TMCS Subsidiary (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and, if applicable, in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have a Material Adverse Effect on TMCS and (iii) has all requisite corporate, partnership or similar power and authority to own or lease its properties and assets and to carry on its business as now conducted.

5.2 Capitalization. (a) The authorized capital stock of TMCS consists of (i) 352,883,506 shares of TMCS Common Stock of which 100 million shares are designated as shares of TMCS Class A Common Stock, 250 million shares are designated as shares of TMCS Class B Common Stock and 2,883,506 shares are

designated as shares of TMCS Class C Common Stock, and (ii) 2 million shares of preferred stock, par value $.01 per share, of TMCS ("TMCS Preferred Stock"). As of February 5, 1999, 63,070,884 shares of TMCS Class A Common Stock were issued and outstanding and no shares thereof were held in treasury, 8,392,109 shares of TMCS Class B Common Stock were issued and outstanding and no shares thereof were held in treasury, no shares of TMCS Class C Common Stock were issued and outstanding or held in treasury, and no shares of TMCS Preferred Stock were outstanding or held in treasury. All of

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the issued and outstanding shares of TMCS Common Stock (together with the TMCS Preferred Stock, the "TMCS Capital Stock") have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, except pursuant to this Agreement, the outstanding TMCS Class A Common Stock and the terms of stock options issued pursuant to the 1998 Employee Stock Purchase Plan and the CitySearch, Inc. 1996 Stock Option Plan as in effect as of the date hereof (the "TMCS Stock Plans"), TMCS does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of TMCS Capital Stock or any other equity securities of TMCS or any securities representing the right to purchase or otherwise receive any shares of TMCS

Capital Stock. As of the date hereof, no shares of TMCS Capital Stock were reserved for issuance, except for (i) shares of TMCS Class A Common Stock and, as disclosed on Schedule 5.2(a) of the TMCS Disclosure Schedule, shares of TMCS Class B Common Stock reserved for issuance upon the exercise of stock options pursuant to the TMCS Stock Plans, (ii) shares of TMCS Class B Common Stock reserved for issuance upon conversion of the outstanding shares of TMCS Class A Common Stock; and (iii) approximately 800,000 shares reserved for issuance or which TMCS otherwise is committed to issue in respect of the transactions contemplated by the definitive agreement to acquire City Auction. Since February 5, 1999, TMCS has not issued any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock. TMCS has previously provided or promptly after the date hereof will provide Lycos and Newco with a list of the option holders, the date of each option to purchase TMCS Common Stock granted, the number of shares subject to each such option, the expiration date of each such option, and the price at which each such option may be exercised under the applicable TMCS Stock Plan.

(b) TMCS owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity ownership interests of each of the TMCS Subsidiaries, free and clear of any liens, pledges, charges, encumbrances and security interests whatsoever ("Liens"), and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No TMCS Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or

agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.

5.3 Authority; No Violation. (a) TMCS has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized (including such authorization as may be required so that no state anti-takeover statute or similar statute or regulation, including, without limitation, Section 203 of the DGCL, is or becomes operative with respect to this Agreement or the transactions contemplated hereby) and this Agreement has been duly and validly adopted, by the Board of Directors of TMCS. The Board of Directors of TMCS has directed that an information statement describing this Agreement and the transactions contemplated hereby be mailed

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to TMCS's stockholders and, except for (i) obtaining the requisite vote of the holders of TMCS Class A Common Stock and TMCS Class B Common Stock, voting together as a single class, for the adoption of this Agreement and the transactions contemplated hereby (it being understood that, pursuant to Section

9.4(b) hereof, Parent has agreed to cause to be voted in favor of the adoption of this Agreement the shares of TMCS Class A Common Stock it owns or the votes of which it controls, and that such number of shares is sufficient to obtain such stockholder approval) and (ii) the filing by TMCS with the Delaware Secretary of State of a certificate of merger with respect to the TMCS Merger and the matters contemplated by Article I of this Agreement, no other corporate proceedings on the part of TMCS are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by TMCS and (assuming due authorization, execution and delivery by the other parties hereto) constitutes a valid and binding obligation of TMCS, enforceable against TMCS in accordance with its terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies).

(b) Neither the execution and delivery of this Agreement by TMCS nor the consummation by TMCS of the transactions contemplated hereby, nor compliance by TMCS with any of the terms or provisions hereof, will (i) violate any provision of the TMCS Charter or TMCS By-Laws or (ii) assuming that the consents and approvals referred to in Section 5.4 are duly obtained, (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to TMCS, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would

constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of TMCS or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which TMCS or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clause (ii) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, will not have a Material Adverse Effect on TMCS.

5.4 Consents and Approvals. Except for (i) the filing of the pre-merger notification report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing of any required applications or notices with any state or foreign agencies and approval of such applications and notices (the "Government Approvals"), (iii) the filing with the Securities and Exchange Commission (the "SEC") of a joint proxy/information statement in definitive form relating to the meeting of Lycos's stockholders to be held in connection with this Agreement and the transactions contemplated hereby (which shall also constitute an information statement in definitive form to be mailed to TMCS stockholders) (the "Proxy/Information Statement"), and of the registration statement on Form S-4 (the "S-4") of Newco in which the Proxy/Information Statement will be included as a prospectus, (iv) the filing of Certificates of Merger with respect to the TMCS Merger and the Lycos Merger with the Secretary of State of the State of Delaware pursuant to the DGCL, (v) such

filings and approvals as are required to be

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made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of Newco Capital Stock pursuant to this Agreement, (vi) the filing of applications for the authorization for quotation on Nasdaq of the shares of Newco Common Stock and Newco Convertible Preferred Stock to be issued pursuant to the Transactions and the approvals thereof and (vii) the approval of this Agreement by the requisite vote of the stockholders of Lycos and TMCS, no consents or approvals of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality (each a "Governmental Entity") are necessary in connection with (A) the execution and delivery by TMCS of this Agreement and (B) the consummation by TMCS of the Reorganization and the other transactions contemplated hereby.

5.5 Financial Statements. TMCS has previously made available to Lycos copies of (a) the unaudited condensed balance sheets of TMCS and its Subsidiaries as of December 31, 1998, and the related unaudited condensed combined statements of operations for the year ended December 31, 1998 and the fiscal year ended January 31, 1998; (b) the audited balance sheets of TMCS as of January 31, 1997 and 1998 and the related statements of operations,

stockholders' equity and cash flows for the three fiscal years in the period ended January 31, 1998, in each case, accompanied by the audit report of Ernst and Young LLP, independent public accountants with respect to TMCS; and (c) the audited consolidated balance sheets of the predecessors of TMCS as of December 31, 1996 and 1997 and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for the period commencing September 20, 1995 and ending on December 31, 1997, in each case, accompanied by the audit report of Ernst and Young LLP, independent public accountants with respect to the predecessor of TMCS; in each case, except for subsection 5.5(a), as set forth in the prospectus, dated December 2, 1998, filed with the SEC on December 2, 1998 (the "TMCS Prospectus"). The unaudited condensed balance sheet of TMCS as of December 31, 1998, together with the notes thereto, is referred to herein as the "TMCS Balance Sheet". The TMCS Balance Sheet (including the related notes, where applicable) is based on the historical financial statements of TMCS and the predecessors to TMCS as adjusted. The financial statements should be read in conjunction with the audited and unaudited financial statements, including the related notes where applicable, of TMCS and the predecessor to TMCS. The TMCS Balance Sheet fairly presents in all material respects the consolidated financial position of TMCS and its Subsidiaries as of the date thereof. The audited and unaudited historical financial statements referred to in this Section 5.5 (including the related notes, where applicable) fairly present in all material respects the results of the consolidated operations and changes in stockholders' equity and consolidated financial position of TMCS and its Subsidiaries or, as the case may be, its predecessors, for the respective fiscal periods or as of the respective dates therein set

forth, subject to normal adjustments in the case of unaudited statements; each of such statements (including the related notes, where applicable) complies in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been prepared in all material respects in accordance with United States generally accepted accounting principles ("GAAP") consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of TMCS and its Subsidiaries have been, and are being, maintained in all material respects in ac-

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cordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions.

5.6 Broker's Fees. Other than Goldman, Sachs & Co. ("Goldman Sachs"), neither TMCS nor any TMCS Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with the Transactions. A true and complete copy of Goldman Sachs' engagement letter with respect to the Transactions has been previously delivered to the other parties hereto.

5.7 Absence of Certain Changes or Events. (a) Except as publicly disclosed in the TMCS Reports filed prior to the date hereof, since January 31, 1998, no event or events have occurred that have had, either individually or in the aggregate, a Material Adverse Effect on TMCS.

(b) Except as disclosed in the TMCS Reports filed prior to the date hereof, since January 31, 1998, TMCS and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course.

(c) Since January 31, 1998, neither TMCS nor any of its Subsidiaries has (i) except for such actions as are in the ordinary course of business or except as required by applicable law, (A) increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of January 31, 1998, or (B) granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonuses (other than customary year-end bonuses for the year ended December 31, 1998) or (ii) suffered any strike, work stoppage, slowdown, or other labor disturbance which will, either individually or in the aggregate, have a Material Adverse Effect on TMCS.

5.8 Legal Proceedings. (a) Except as disclosed in the TMCS Reports filed prior to the date hereof, neither TMCS nor any of its Subsidiaries is a party to any, and there are no pending or, to the best of TMCS's knowledge, threatened, legal, administrative, arbitral or other proceedings, claims,

actions or governmental or regulatory investigations of any nature against TMCS or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by this Agreement or the Option Agreements which, in any such case, is reasonably likely, either individually or in the aggregate, to have a Material Adverse Effect on TMCS.

(b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon TMCS, any of its Subsidiaries or the assets of TMCS or any of its Subsidiaries that has had, or will have, either individually or in the aggregate, a Material Adverse Effect on TMCS.

5.9 Taxes and Tax Returns. (a) Each of TMCS and its Subsidiaries has duly filed all federal, state, foreign and local information returns and tax returns required to be filed by it on or prior to the date hereof (all such returns being accurate and complete in all material respects) and has duly paid or made adequate provision for the payment of all Taxes and other governmental charges which have been incurred or are due or claimed to be due from it by federal, state, foreign or local taxing authorities on or prior to the date of this Agreement (including, without

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limitation, if and to the extent applicable, those due in respect of its

properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls) other than information returns, tax returns, Taxes or other governmental charges as to which the failure to file, pay or make provision for will not, either individually or in the aggregate, have a Material Adverse Effect on TMCS. Except as would not, individually or in the aggregate, have a Material Adverse Effect on TMCS, there are no disputes pending, or claims asserted for, Taxes or assessments upon TMCS or any of its Subsidiaries for which TMCS does not have adequate reserves. In addition, (A) proper and accurate amounts have been withheld by TMCS and its Subsidiaries from their employees for all prior periods in compliance in all material respects with the tax withholding provisions of applicable federal, state and local laws, except where failure to do so will not, either individually or in the aggregate, have a Material Adverse Effect on TMCS, (B) federal, state, and local returns which are accurate and complete in all material respects have been filed by TMCS and its Subsidiaries for all periods for which returns were due with respect to income tax withholding, Social Security and unemployment taxes, except where failure to do so will not, either individually or in the aggregate, have a Material Adverse Effect on TMCS, (C) the amounts shown on such federal, state or local returns to be due and payable have been paid in full or adequate provision therefor has been included by TMCS in its consolidated financial statements, except where failure to do so will not, either individually or in the aggregate, have a Material Adverse Effect on TMCS and (D) there are no Tax liens upon any property or assets of TMCS or its Subsidiaries except liens for current taxes not yet due or liens that will not, either individually or in the aggregate, have a Material Adverse Effect on TMCS. Neither TMCS nor any of its Subsidiaries has been

required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by TMCS or any of its Subsidiaries, and the Internal Revenue Service (the "IRS") has not initiated or proposed any such adjustment or change in accounting method, in either case which has had or will have, either individually or in the aggregate, a Material Adverse Effect on TMCS. Except as set forth in the financial statements described in Section 6.5, neither TMCS nor any of its Subsidiaries has entered into a transaction which is being accounted for as an installment obligation under Section 453 of the Code, which will have, either individually or in the aggregate, a Material Adverse Effect on TMCS.

(b) As used in this Agreement, the term "Tax" or "Taxes" means all federal, state, local, and foreign income, excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales, transfer, use, payroll, employment, severance, withholding, duties, intangibles, franchise, backup withholding, and other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon.

(c) No disallowance of a deduction under Section 162(m) of the Code for employee remuneration of any amount paid or payable by TMCS or any Subsidiary of TMCS under any contract, plan, program, arrangement or understanding will have, either individually or in the aggregate, a Material Adverse Effect on TMCS.

5.10 Employees. (a) Promptly following the date hereof, TMCS will deliver a true and complete list of each material employee or director benefit

plan, arrangement or agreement that is maintained, or contributed to, as of the date of this Agreement (the "TMCS Benefit

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Plans") by TMCS, any of its Subsidiaries or by any trade or business, whether or not incorporated (a "TMCS ERISA Affiliate"), all of which together with TMCS would be deemed a "single employer" within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").

(b) TMCS has heretofore made or promptly following the date hereof will make available to Lycos true and complete copies of each of the TMCS Benefit Plans and certain related documents, including, but not limited to, (i) the actuarial report for such TMCS Benefit Plan (if applicable) for each of the last two years and (ii) the most recent determination letter from the IRS (if applicable) for such TMCS Benefit Plan.

(c) (i) Each of the TMCS Benefit Plans has been operated and administered in all material respects in compliance with applicable laws, including, but not limited to, ERISA and the Code, (ii) each of the TMCS Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, and there are no existing circumstances or any events that have occurred that will adversely affect the qualified status of any such TMCS

Benefit Plan, (iii) with respect to each TMCS Benefit Plan that is subject to Title IV of ERISA, the present value of accrued benefits under such TMCS Benefit Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such TMCS Benefit Plan's actuary with respect to such TMCS Benefit Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such TMCS Benefit Plan allocable to such accrued benefits, (iv) no TMCS Benefit Plan provides benefits, including, without limitation, death or medical benefits (whether or not insured), with respect to current or former employees or directors of TMCS or its Subsidiaries beyond their retirement or other termination of service, other than (A) coverage mandated by applicable law, (B) death benefits or retirement benefits under any "employee pension plan" (as such term is defined in Section 3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the books of TMCS or its Subsidiaries or (D) benefits the full cost of which is borne by the current or former employee or director (or his beneficiary), (v) no material liability under Title IV of ERISA has been incurred by TMCS, its Subsidiaries or any TMCS ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to TMCS, its Subsidiaries or any TMCS ERISA Affiliate of incurring a material liability thereunder, (vi) no TMCS Benefit Plan is a "multiemployer pension plan" (as such term is defined in Section 3(37) of ERISA), (vii) all contributions or other amounts payable by TMCS or its Subsidiaries as of the Effective Time with respect to each TMCS Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code, (viii) none of TMCS, its Subsidiaries or any other person, including any fiduciary, has engaged in a

transaction in connection with which TMCS, its Subsidiaries or any TMCS Benefit Plan will be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of TMCS there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the TMCS Benefit Plans or any trusts related thereto that will have, either individually or in the aggregate, a Material Adverse Effect on TMCS.

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(d) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) (i) result (either alone or upon the occurrence of any additional acts or events) in any payment (including, without limitation, severance, unemployment compensation, "excess parachute payment" (within the meaning of Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any director or any employee of TMCS or any of its affiliates from TMCS or any of its affiliates under any TMCS Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any TMCS Benefit Plan or (iii) result in any acceleration of the time of payment or vesting of any such benefits which will, either individually or in the aggregate, have a Material Adverse Effect on TMCS.

5.11 SEC Reports. TMCS has previously made available to Lycos an accurate and complete copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1998 by TMCS or any of its predecessors with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act") (the "TMCS Reports") and prior to the date hereof and (b) communication mailed by TMCS or any of its predecessors to its stockholders since January 1, 1998 and prior to the date hereof, and no such TMCS Report or communication (including without limitation the TMCS Prospectus), as of the date thereof, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information as of a later date (but before the date hereof) shall be deemed to modify information as of an earlier date. Since January 1, 1998, as of their respective dates, all TMCS Reports filed under the Securities Act and the Exchange Act complied in all material respects with the published rules and regulations of the SEC with respect thereto.

5.12 Compliance with Applicable Law. Except as disclosed in the TMCS Reports filed prior to the date hereof, TMCS and each of its Subsidiaries hold all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to each, and have complied in all material respects with and are not in default in any material respect under any, applicable law, statute, order, rule, regulation,

policy and/or guideline of any Governmental Entity relating to TMCS or any of its Subsidiaries, except where the failure to hold such license, franchise, permit or authorization or such noncompliance or default will not, either individually or in the aggregate, have a Material Adverse Effect on TMCS.

5.13 Intellectual Property; Proprietary Rights; Employee Restrictions. (a) All material registered copyrights, copyright registrations and copyright applications, trademark registrations and applications for registration, patents and patent applications, trademarks, service marks, trade names, or Internet domain names (collectively, "Intellectual Property Rights") used by TMCS or its Subsidiaries in their respective businesses, are owned by TMCS or such Subsidiaries by operation of law, or have been validly assigned to TMCS or such Subsidiaries or TMCS otherwise has the right to use such Intellectual Property Rights in its business as currently conducted. TMCS believes that the Intellectual Property Rights are sufficient to carry on the business of TMCS as presently conducted. TMCS or one of its Subsidiaries has exclusive ownership

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of or a license to use all Intellectual Property Rights used by TMCS or its Subsidiaries in TMCS's business as presently conducted, including all other registered Intellectual Property Rights used in connection with or contained in all versions of TMCS's World Wide Web sites and all licenses, assignments and

releases of Intellectual Property Rights of others without which TMCS or its Subsidiaries could not offer the services they currently offer or has obtained any licenses, releases or assignments reasonably necessary to use all third parties' Intellectual Property Rights in works embodied in its services, except as would not, individually or in the aggregate, have a Material Adverse Effect on TMCS. The present business activities or products of TMCS do not infringe any Intellectual Property Rights of others, except as would not, individually or in the aggregate, have a Material Adverse Effect on TMCS. To its knowledge, TMCS has not received any notice or other claim from any person asserting that any of TMCS's present activities infringe or may infringe any Intellectual Property Rights of such person.

(b) Except as would not have a Material Adverse Effect on TMCS or as disclosed in the TMCS Reports filed prior to the date hereof, (i) TMCS has the right to use all trade secrets, customer lists, hardware designs, programming processes, software and other information required for its services or its business as presently conducted or contemplated; (ii) TMCS has taken all reasonable measures to protect and preserve the security and confidentiality of its trade secrets and other confidential information; (iii) all employees and consultants of TMCS or its Subsidiaries involved in the design, review, evaluation or development of products or Intellectual Property Rights have executed nondisclosure and assignment of inventions agreements to protect the confidentiality of TMCS's trade secrets and other confidential information and to vest in TMCS exclusive ownership of such Intellectual Property Rights; (iv) to the knowledge of TMCS, all trade secrets and other confidential information

of TMCS are not part of the public domain or knowledge, nor, to the knowledge of TMCS, have they been misappropriated by any person having an obligation to maintain such trade secrets or other confidential information in confidence for TMCS; and (v) to the knowledge of TMCS, no employee or consultant of TMCS or any or its Subsidiaries has used any trade secrets or other confidential information of any other person in the course of their work for TMCS or such Subsidiary.

(c) To the knowledge of TMCS, no university, government agency (whether federal or state) or other organization sponsored research and development conducted by TMCS or any of its Subsidiaries or has any claim of right to or ownership of or other encumbrance upon the Intellectual Property Rights there of TMCS. TMCS is not aware of any infringement by others of its copyrights or other Intellectual Proprietary Rights in any of its technology or services, or any violation of the confidentiality of any of its proprietary information. To TMCS's knowledge, TMCS is not making unlawful use of any confidential information or trade secrets of any past or present employees of TMCS or any of its Subsidiaries. For the purposes of this Section 5.13, and except where the context otherwise requires, Intellectual Property Rights also includes any and all intellectual property rights, licenses, databases, computer programs and other computer software user interfaces, know-how, trade secrets, customer lists, proprietary technology, processes and formulae, source code, object code, algorithms, architecture, structure, display screens, layouts, development tools, instructions, templates, marketing materials created by TMCS or its Subsidiaries, inventions, trade dress, logos and designs.

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5.14 Certain Contracts. (a) Neither TMCS nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) with respect to the employment of any directors, officers or employees, other than in the ordinary course of business consistent with past practice, (ii) which, upon the consummation or stockholder approval of the Transactions will (either alone or upon the occurrence of any additional acts or events) result in any payment (whether of severance pay or otherwise) becoming due from TMCS, Newco, or any of their respective Subsidiaries to any officer or employee thereof, (iii) which is a "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the TMCS Reports, (iv) which materially restricts the conduct of any line of business by TMCS or upon consummation of the Transactions will materially restrict the ability of Newco to engage in any line of business, (v) with or to a labor union or guild (including any collective bargaining agreement) or (vi) (including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan) any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any stockholder approval or the consummation of the Transactions, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. TMCS has previously made or promptly following the date hereof will make available to

Lycos true and correct copies of all material employment and deferred compensation agreements which are in writing and to which TMCS is a party. Each contract, arrangement, commitment or understanding of the type described in this Section 5.14(a), whether or not set forth in the TMCS Disclosure Schedule, is referred to herein as a "TMCS Contract," and neither TMCS nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto which, either individually or in the aggregate, will have a Material Adverse Effect on TMCS.

(b) (i) Each TMCS Contract is valid and binding on TMCS or any of its Subsidiaries, as applicable, and in full force and effect, (ii) TMCS and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it to date under each TMCS Contract, except where such noncompliance, either individually or in the aggregate, will not have a Material Adverse Effect on TMCS, and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, will constitute, a material default on the part of TMCS or any of its Subsidiaries under any such TMCS Contract, except where such default, either individually or in the aggregate, will not have a Material Adverse Effect on TMCS.

5.15 Undisclosed Liabilities. Except for those liabilities that are fully reflected or reserved against on the consolidated TMCS Balance Sheet and for liabilities incurred in the ordinary course of business consistent with past practice, since September 28, 1998, neither TMCS nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued,

contingent or otherwise and whether due or to become due) that, either individually or in the aggregate, has had or will have a Material Adverse Effect on TMCS.

5.16 Insurance. TMCS and its Subsidiaries have in effect insurance coverage with reputable insurers or are self-insured, which in respect of amounts, premiums, types and risks insured, constitutes reasonably adequate coverage against all risks customarily insured against by

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bank holding companies and their subsidiaries comparable in size and operations to TMCS and its Subsidiaries.

5.17 Environmental Liability. There are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that could reasonably result in the imposition, on TMCS of any liability or obligation arising under common law or under any local, state or federal environmental statute, regulation or ordinance including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), pending or, to TMCS's knowledge, threatened against TMCS, which liability or obligation

will, either individually or in the aggregate, have a Material Adverse Effect on TMCS. To the knowledge of TMCS, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that will, individually or in the aggregate, have a Material Adverse Effect on TMCS. TMCS is not subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any liability or obligation with respect to the foregoing that will have, either individually or in the aggregate, a Material Adverse Effect on TMCS.

5.18 State Takeover Laws. Section 203 of the DGCL will not apply to this Agreement or any of the transactions contemplated hereby or thereby.

5.19 Year 2000 Compliance. TMCS has adopted and implemented a commercially reasonable plan to provide (a) that the change of the year from 1999 to the year 2000 will not materially and adversely affect the information and business systems or online operations of TMCS or its Subsidiaries and (b) that the impacts of such change on the vendors and customers of TMCS and its Subsidiaries will not have a Material Adverse Effect on TMCS. In TMCS's reasonable best estimate, no expenditures materially in excess of currently budgeted items previously disclosed to Lycos will be required in order to cause the information and business systems of TMCS and its Subsidiaries to operate properly following the change of the year 1999 to the year 2000. TMCS reasonably expects that it will resolve any issues related to such change of the year in accordance with the timetable contemplated by such plan (and in any event on a

timely basis in order to be resolved before the year 2000). Between the date of this Agreement and the Effective Time, TMCS shall continue to use all commercially reasonable efforts to implement such plan.

5.20 Certain Tax Matters. As of the date of this Agreement, TMCS has no reason to believe that the Reorganization and the Contribution, taken together, will not qualify as an exchange within the meaning of Section 351 of the Code.

5.21 Registration Statement. None of the information supplied or to be supplied by TMCS in writing for inclusion or incorporation by reference in the S-4 will, at the time it becomes effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. If at any time prior to the meeting of the stockholders of Lycos to be held in connection with the

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adoption of this Agreement, or any adjournment thereof, any event with respect to TMCS, its officers and directors or any of its Subsidiaries shall, occur which is required to be described in an amendment of, or a supplement to the S-4, TMCS shall notify Newco and Lycos thereof by reference to this Section 5.21 and such event shall be so described. Any such amendment or supplement shall be

promptly filed with the SEC and, as and to the extent required by law, disseminated to the stockholders of TMCS, and such amendment or supplement shall comply in all material respects with all provisions of the Securities Act.

5.22 Ownership of Lycos Capital Stock. Neither TMCS nor any of it Subsidiaries owns any shares of Lycos Capital Stock.

5.23 Opinion of Financial Advisors. The Special Committee of the Board of Directors of TMCS has received the opinion, dated as of the date hereof, of Goldman Sachs to the effect that the Class A Exchange Ratio, the Class B Exchange Ratio and the TMCS Preferred Exchange Ratio in the TMCS Merger are, taken as a whole, fair to the holders of TMCS Common Stock, other than Parent and its Subsidiaries (other than TMCS), from a financial point of view.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF LYCOS

Except as disclosed in the Lycos disclosure schedule delivered to TMCS and Newco concurrently herewith (the "Lycos Disclosure Schedule") and subject to the standard set forth in Section 12.10, Lycos hereby represents and warrants to TMCS and Newco as follows:

6.1 Corporate Organization. (a) Lycos is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Lycos has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not, either individually or in the aggregate, have a Material Adverse Effect on Lycos. True and complete copies of the Restated Certificate of Incorporation (the "Lycos Charter") and the Amended and Restated By-Laws of Lycos (the "Lycos Bylaws"), as in effect as of the date of this Agreement, have previously been made available by Lycos to Newco and TMCS.

(b) Each Lycos Subsidiary (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether Federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have a Material Adverse Effect on Lycos and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted.

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6.2 Capitalization. (a) The authorized capital stock of Lycos consists of 100,000,000 shares of Lycos Common Stock, of which, as of February 5, 1999, 43,174,101 shares were issued and outstanding, and 5,000,000 shares of preferred stock, par value $.01 per share, of Lycos ("Lycos Preferred Stock" and, together with Lycos Common Stock, "Lycos Capital Stock") of which as of the date hereof no shares were issued and outstanding. As of the date hereof, not more than 1,000,000 shares of Lycos Common Stock are held in Lycos's treasury. As of the date hereof, no shares of Lycos Common Stock or Lycos Preferred Stock were reserved for issuance, except for (i) the shares of Lycos Common Stock issuable pursuant to the Option Agreements, (ii) 15,100,000 shares reserved for issuance pursuant to the Lycos 1995 Stock Option Plan, the Lycos 1996 Stock Option Plan, the Lycos 1996 Non-Employee Director Stock Option Plan, the 1996 Employee Stock Purchase Plan and other employee and director stock plans of Lycos in effect as of the date hereof (the "Lycos Stock Plans") and (iii) up to 3,371,442 shares reserved for issuance in respect of the transactions contemplated by the definitive merger agreement entered into on October 5, 1998, and amended and restated on November 23, 1998, by the Company and Wired Ventures Inc. (the "Wired Merger Agreement"). All of the issued and outstanding shares of Lycos Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, except for the Lycos Option Agreements, the Lycos Stock Plans, the Wired Merger Agreement and as contemplated by the engagement letter described in Section 6.6 hereof, Lycos does not have and is not bound by any outstanding subscriptions, options,

warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Lycos Capital Stock or any other equity securities of Lycos or any securities representing the right to purchase or otherwise receive any shares of Lycos Capital Stock. Since February 5, 1999, Lycos has not issued any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock, other than as permitted by Section 8.2(b) and pursuant to (A) the exercise of employee stock options granted prior to such date and (B) pursuant to the Option Agreements. Lycos has previously provided or promptly after the date hereof will provide TMCS and Newco with a list of the option holders, the date of each option to purchase Lycos Common Stock granted, the number of shares subject to each such option, the expiration date of each such option and the price at which each such option may be exercised under an applicable Lycos Stock Plan.

(b) Lycos owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity ownership interests of each of the Lycos Subsidiaries, free and clear of any Liens, and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Lycos Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.

6.3 Authority; No Violation. (a) Lycos has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contem-

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plated hereby have been duly and validly authorized (including such authorization as may be required so that no state anti-takeover statute or similar statute or regulation, including, without limitation, Section 203 of the DGCL) by the Board of Directors of Lycos. The Board of Directors of Lycos has directed that this Agreement and the transactions contemplated hereby be submitted to Lycos's stockholders for adoption at a meeting of such stockholders and, except for (i) the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Lycos Common Stock and (ii) the filing by Lycos with the Delaware Secretary of State of a certificate of merger with respect to the Lycos Merger and the matters contemplated by Article I of this Agreement, no other corporate proceedings on the part of Lycos are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Lycos and (assuming due authorization, execution and delivery by the other parties hereto) constitutes a valid and binding obligation of Lycos,

enforceable against Lycos in accordance with its terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies).

(b) Neither the execution and delivery of this Agreement by Lycos, nor the consummation by Lycos of the transactions contemplated hereby, nor compliance by Lycos with any of the terms or provisions hereof, will (i) violate any provision of the Lycos Charter or Lycos By-Laws, or (ii) assuming that the consents and approvals referred to in Section 6.4 are duly obtained, (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Lycos, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Lycos or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Lycos or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clause (ii) above) for such violations, conflicts, breaches or defaults which, individually or in the aggregate, will not have a Material Adverse Effect on Lycos.

6.4 Consents and Approvals. Except for (i) the filing of the pre-merger notification report under the HSR Act, (ii) the Government Approvals, (iii) the filing with the SEC of the Proxy/Information Statement and of the S-4, (iv) the filing of Certificates of Merger with respect to the TMCS Merger and the Lycos Merger with the Secretary of State of the State of Delaware pursuant to the DGCL, (v) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of Newco Capital Stock pursuant to this Agreement, (vi) the filing of applications for the authorization of quotation on Nasdaq of Newco Class B Common Stock and Newco Convertible Preferred Stock to be issued pursuant hereto and the approvals thereof, and (vii) the approval of this Agreement by the requisite vote of the stockholders of Lycos, no consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with (A) the

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execution and delivery by Lycos of this Agreement and (B) the consummation by Lycos of the Merger and the other transactions contemplated hereby.

6.5 Financial Statements. Lycos has previously made available to TMCS copies (i) of the consolidated balance sheets of Lycos and its Subsidiaries as of July 31, 1998 and 1997 and the related consolidated statements of operations,

stockholders' equity and cash flows for the fiscal years 1996 through 1998, inclusive, as reported in Lycos's Annual Report on Form 10-K for the fiscal year ended July 31, 1998 filed with the SEC under the Exchange Act (the "Lycos 10-K"), in each case, accompanied by the audit report of KPMG LLP, independent public accountants with respect to Lycos; and (ii) the consolidated balance sheets of Lycos and its Subsidiaries as of October 31, 1998 and the related consolidated statements of operations, stockholders' equity and cash flows for the period ended October 31, 1998, as reported in Lycos's Quarterly Report on Form 10-Q for the three months ended October 31, 1998 filed with the SEC under the Exchange Act. The October 31, 1998 consolidated balance sheet of Lycos (including the related notes, where applicable) fairly presents in all material respects the consolidated financial position of Lycos and its Subsidiaries as of the date thereof, and the other financial statements referred to in this Section 6.5 (including the related notes, where applicable) fairly present in all material respects the results of the consolidated operations and changes in stockholders' equity and consolidated financial position of Lycos and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth, subject to normal year-end audit adjustments in the case of unaudited statements; each of such statements (including the related notes, where applicable) complies in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been prepared in all material respects in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of

Lycos and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions.

6.6 Broker's Fees. Other than Wasserstein Perella & Co. ("Wasserstein Perella"), neither Lycos nor any Lycos Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with the Mergers or related transactions contemplated by this Agreement, the Contribution Agreement or the Option Agreements. A true and complete copy of Wasserstein Perella's engagement letter with respect to the Transactions has been previously delivered to the other parties hereto.

6.7 Absence of Certain Changes or Events. (a) Except as publicly disclosed in Lycos Reports filed prior to the date hereof, since July 31, 1998, no event or events have occurred which has had or would have, individually or in the aggregate, a Material Adverse Effect on Lycos.

(b) Except as disclosed in Lycos Reports filed prior to the date hereof, since July 31, 1998, Lycos and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course.

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(c) Except as contemplated by the employment agreements, dated as of the date hereof, with the Chief Executive Officer of Lycos and the Chief Financial Officer of Lycos, since July 31, 1998, neither Lycos nor any of its Subsidiaries has (i) except for such actions as are in the ordinary course of business or except as required by applicable law, (A) increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of July 31, 1998, or (B) granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonuses (other than customary bonuses for fiscal 1998) or (ii) suffered any strike, work stoppage, slowdown, or other labor disturbance which will have, either individually or in the aggregate, a Material Adverse Effect on Lycos.

6.8 Legal Proceedings. (a) Except as disclosed in the Lycos Reports filed prior to the date hereof, neither Lycos nor any of its Subsidiaries is a party to any, and there are no pending or, to the best of Lycos's knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Lycos or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by this Agreement or the Option Agreements which, in any such case, is reasonably likely, either individually or in the aggregate, to have a Material Adverse Effect on Lycos.

(b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon Lycos, any of its Subsidiaries or the assets of Lycos

or any of its Subsidiaries that has had or will have, either individually or in the aggregate, a Material Adverse Effect on Lycos.

6.9 Taxes and Tax Returns. (a) Each of Lycos and its Subsidiaries has duly filed all federal, state, foreign and local information returns and tax returns required to be filed by it on or prior to the date hereof (all such returns being accurate and complete in all material respects) and has duly paid or made adequate provision for the payment of all Taxes and other governmental charges which have been incurred or are due or claimed to be due from it by federal, state, foreign or local taxing authorities on or prior to the date of this Agreement (including, without limitation, if and to the extent applicable, those due in respect of its properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls) other than information returns, tax returns, Taxes or other governmental charges as to which the failure to file, pay or make provision for will not have, either individually or in the aggregate, a Material Adverse Effect on Lycos. Except as would not, individually or in the aggregate, have a Material Adverse Effect on Lycos, there are no disputes pending, or claims asserted for, Taxes or assessments upon Lycos or any of its Subsidiaries for which Lycos does not have adequate reserves. In addition, (i) proper and accurate amounts have been withheld by Lycos and its Subsidiaries from their employees for all prior periods in compliance in all material respects with the tax withholding provisions of applicable federal, state and local laws, except where failure to do so will not, either individually or in the aggregate, have a Material Adverse Effect on Lycos, (ii) federal, state and local returns which are accurate and complete in all material

respects have been filed by Lycos and its Subsidiaries for all periods for which returns were due with respect to income tax withholding, Social Security and unemployment taxes, except where failure to do so will not, either individually or in the aggregate, have a Material Adverse Effect on Lycos, (iii) the amounts shown on such federal, state or local returns to be due and payable have been paid in full or adequate provision

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therefor has been included by Lycos in its consolidated financial statements, except where failure to do so will not, individually or in the aggregate, have a Material Adverse Effect on Lycos and (iv) there are no Tax liens upon any property or assets of Lycos or its Subsidiaries except liens for current taxes not yet due or liens that will not have, either individually or in the aggregate, a Material Adverse Effect on Lycos. Neither Lycos nor any of its Subsidiaries has been required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by Lycos or any of its Subsidiaries, and the IRS has not initiated or proposed any such adjustment or change in accounting method, in either case, which has had or will have, either individually or in the aggregate, a Material Adverse Effect on Lycos. Except as set forth in the financial statements described in Section 6.5, neither Lycos nor any of its Subsidiaries has entered into a transaction which is being accounted for as an installment obligation

under Section 453 of the Code, which will have, either individually or in the aggregate, a Material Adverse Effect on Lycos.

(b) No disallowance of a deduction under Section 162(m) of the Code for employee remuneration of any amount paid or payable by Lycos or any Subsidiary of Lycos under any contract, plan, program, arrangement or understanding will have, either individually or in the aggregate, a Material Adverse Effect on Lycos.

6.10 Employees. (a) Promptly following the date hereof, Lycos will deliver a true and complete list of each material employee benefit plan, arrangement or agreement that is maintained, or contributed to, as of the date of this Agreement (the "Lycos Benefit Plans") by Lycos, any of its Subsidiaries or by any trade or business, whether or not incorporated (a "Lycos ERISA Affiliate"), all of which together with Lycos would be deemed a "single employer" within the meaning of Section 4001 of ERISA.

(b) Lycos has heretofore made or promptly following the date hereof will make available to TMCS true and complete copies of each of the Lycos Benefit Plans and certain related documents, including, but not limited to, (i) the actuarial report for such Lycos Benefit Plan (if applicable) for each of the last two years, and (ii) the most recent determination letter from the IRS (if applicable) for such Lycos Benefit Plan.

(c) (i) Each of the Lycos Benefit Plans has been operated and

administered in all material respects in compliance with applicable laws, including, but not limited to, ERISA and the Code, (ii) each of the Lycos Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, and there are no existing circumstances or any events that have occurred that will adversely affect the qualified status of any such Lycos Benefit Plan, (iii) with respect to each Lycos Benefit Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Lycos Benefit Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Lycos Benefit Plan's actuary with respect to such Lycos Benefit Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Lycos Benefit Plan allocable to such accrued benefits, (iv) no Lycos Benefit Plan provides benefits, including, without limitation, death or medical benefits (whether or not insured), with respect to current or former employees or directors of Lycos or its Subsidiaries beyond their retirement or other termination of service, other

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than (A) coverage mandated by applicable law, (B) death benefits or retirement benefits under any "employee pension plan" (as such term is defined in Section 3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the books of Lycos or its Subsidiaries or (D) benefits the full cost of which is

borne by the current or former employee or director (or his beneficiary), (v) no material liability under Title IV of ERISA has been incurred by Lycos, its Subsidiaries or any Lycos ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to Lycos, its Subsidiaries or any Lycos ERISA Affiliate of incurring a material liability thereunder, (vi) no Lycos Benefit Plan is a "multiemployer pension plan" (as such term is defined in Section 3(37) of ERISA), (vii) all contributions or other amounts payable by Lycos or its Subsidiaries as of the Effective Time with respect to each Lycos Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code, (viii) none of Lycos, its Subsidiaries or any other person, including any fiduciary, has engaged in a transaction in connection with which Lycos, its Subsidiaries or any Lycos Benefit Plan will be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Lycos there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Lycos Benefit Plans or any trusts related thereto which will have, either individually or in the aggregate, a Material Adverse Effect on Lycos.

(d) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) (i) result (either alone or upon the occurrence of any additional acts or events) in any payment (including, without limitation, severance, unemployment compensation, "excess parachute payment"

(within the meaning of Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming due to any director or any employee of Lycos or any of its affiliates from Lycos or any of its affiliates under any Lycos Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Lycos Benefit Plan or (iii) result in any acceleration of the time of payment or vesting of any such benefits that will have, either individually or in the aggregate, a Material Adverse Effect on Lycos.

6.11 SEC Reports. Lycos has previously made available to TMCS an accurate and complete copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since August 1, 1997 by Lycos with the SEC pursuant to the Securities Act or the Exchange Act (the "Lycos Reports") and prior to the date hereof and (b) communication mailed by Lycos to its stockholders since August 1, 1997 and prior to the date hereof, and no such Lycos Report or communication, as of the date thereof, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, except that information as of a later date (but before the date hereof) shall be deemed to modify information as of an earlier date. Since August 1, 1997, as of their respective dates, all Lycos Reports filed under the Securities Act and the Exchange Act complied in all material respects with the published rules and regulations of the SEC with respect thereto.

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6.12 Compliance with Applicable Law. Except as disclosed in the Lycos Reports filed prior to the date hereof, Lycos and each of its Subsidiaries hold all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to each, and have complied in all material respects with and are not in default in any material respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to Lycos or any of its Subsidiaries, except where the failure to hold such license, franchise, permit or authorization or such noncompliance or default will not, either individually or in the aggregate, have a Material Adverse Effect on Lycos.

6.13 Intellectual Property; Proprietary Rights; Employee Restrictions. (a) All Intellectual Property Rights used by Lycos or its Subsidiaries in their respective businesses are owned by Lycos or such Subsidiaries by operation of law, have been validly assigned to Lycos or such Subsidiaries or Lycos otherwise has the right to use such Intellectual Property Rights in its business as currently conducted. Lycos believes that the Intellectual Property Rights are sufficient to carry on the business of Lycos as presently conducted. Lycos or one of its Subsidiaries has exclusive ownership of or a license to use all Intellectual Property Rights all Intellectual Property Rights used by Lycos or its Subsidiaries in Lycos's business as presently conducted, including all other registered Intellectual Property Rights used in connection with or contained in all versions of Lycos's World Wide Web sites and all licenses, assignments and

releases of Intellectual Property Rights of others without which Lycos or its Subsidiaries could not offer the services they currently offer or has obtained any licenses, releases or assignments reasonably necessary to use all third parties' Intellectual Property Rights in works embodied in its services, except as would not, individually or in the aggregate, have a Material Adverse Effect on Lycos. The present business activities or products of Lycos do not infringe any Intellectual Property Rights of others, except as would not, have a Material Adverse Effect on Lycos. To its knowledge, Lycos has not received any notice or other claim from any person asserting that any of Lycos's present activities infringe or may infringe any Intellectual Property Rights of such person.

(b) Except as would not have a Material Adverse Effect on Lycos or as disclosed in the Lycos Reports filed prior to the date hereof, (i) Lycos has the right to use all trade secrets, customer lists, hardware designs, programming processes, software and other information required for its services or its business as presently conducted or contemplated; (ii) Lycos has taken all reasonable measures to protect and preserve the security and confidentiality of its trade secrets and other confidential information; (iii) all employees and consultants of Lycos or its Subsidiaries involved in the design, review, evaluation or development of products or Intellectual Property Rights have executed nondisclosure and assignment of inventions agreements to protect the confidentiality of Lycos's trade secrets and other confidential information and to vest in Lycos exclusive ownership of such Intellectual Property Rights; (iv) to the knowledge of Lycos, all trade secrets and other confidential information of Lycos are not part of the public domain or knowledge, nor, to the knowledge

of Lycos, have they been misappropriated by any person having an obligation to maintain such trade secrets or other confidential information in confidence for Lycos; (v) to the knowledge of Lycos, no employee or consultant of Lycos or any of its Subsidiaries has used any trade secrets or other confidential information of any other person in the course of their work for Lycos or such Subsidiary.

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(c) To the knowledge of Lycos, no university, government agency (whether federal or state) or other organization sponsored research and development conducted by Lycos or any of its Subsidiaries or has any claim of right to or ownership of or other encumbrance upon the Intellectual Property Rights of Lycos. Lycos is not aware of any infringement by others of its copyrights or other Intellectual Proprietary Rights in any of its technology or services, or any violation of the confidentiality of any of its proprietary information. To Lycos's knowledge, Lycos is not making unlawful use of any confidential information or trade secrets of any past or present employees of Lycos or any of its Subsidiaries. For the purposes of this Section 6.13, and except where the context otherwise requires, Intellectual Property Rights also includes any and all intellectual property rights, licenses, databases, computer programs and other computer software user interfaces, know-how, trade secrets, customer lists, proprietary technology, processes and formulae, source code, object code, algorithms, architecture, structure, display screens, layouts, development tools, instructions, templates, marketing materials created by Lycos

or its Subsidiaries, inventions, trade dress, logos and designs.

6.14 Certain Contracts. (a) Neither Lycos nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) with respect to the employment of any directors, officers or employees other than in the ordinary course of business consistent with past practice, (ii) which, upon the consummation or stockholder approval of the Transactions will (either alone or upon the occurrence of any additional acts or events) result in any payment (whether of severance pay or otherwise) becoming due from Lycos or Newco or any of their respective Subsidiaries to any officer or employee thereof, (iii) which is a "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Lycos Reports, (iv) which materially restricts the conduct of any line of business by Lycos or upon consummation of the Transactions will materially restrict the ability of Newco to engage in any line of business, (v) with or to a labor union or guild (including any collective bargaining agreement) or (vi) (including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan) any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any stockholder approval or the consummation of the Transactions, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Lycos has previously made or promptly following the date hereof will make available to TMCS true and correct copies of all material employment and deferred

compensation agreements which are in writing and to which Lycos is a party. Each contract, arrangement, commitment or understanding of the type described in this Section 6.14(a), whether or not set forth in the Lycos Disclosure Schedule, is referred to herein as a "Lycos Contract," and neither Lycos nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto which will have, individually or in the aggregate, a Material Adverse Effect on Lycos.

(b) (i) Each Lycos Contract is valid and binding on Lycos or any of its Subsidiaries, as applicable, and in full force and effect, (ii) Lycos and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it to date under each Lycos Contract, except where such noncompliance, either individually or in the aggregate, will not have

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a Material Adverse Effect on Lycos, and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, will constitute, a material default on the part of Lycos or any of its Subsidiaries under any such Lycos Contract, except where such default, either individually or in the aggregate, will not have a Material Adverse Effect on Lycos.

6.15 Undisclosed Liabilities. Except for those liabilities that are

fully reflected or reserved against on the consolidated balance sheet of Lycos included in the Lycos October 31, 1998 Form 10-Q and for liabilities incurred in the ordinary course of business consistent with past practice, since October 31, 1998, neither Lycos nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) that, either individually or in the aggregate, has had or will have, a Material Adverse Effect on Lycos.

6.16 Insurance. Lycos and its Subsidiaries have in effect insurance coverage with reputable insurers or are self-insured, which in respect of amounts, premiums, types and risks insured, constitutes reasonably adequate coverage against all risks customarily insured against by bank holding companies and their subsidiaries comparable in size and operations to Lycos and its Subsidiaries.

6.17 Environmental Liability. There are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that reasonably could result in the imposition, on Lycos of any liability or obligation arising under common law or under any local, state or federal environmental statute, regulation or ordinance including, without limitation, CERCLA, pending or, to Lycos's knowledge, threatened against Lycos, which liability or obligation will have, either individually or in the aggregate, a Material Adverse Effect on Lycos. To the knowledge of Lycos, there is no reasonable basis for any such proceeding,

claim, action or governmental investigation that would impose any liability or obligation that will have, either individually or in the aggregate, a Material Adverse Effect on Lycos. Lycos is not subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any liability or obligation with respect to the foregoing that will have, either individually or in the aggregate, a Material Adverse Effect on Lycos.

6.18 State Takeover Laws. (a) The Board of Directors of Lycos has approved the transactions contemplated by this Agreement and the Option Agreements for purposes of Section 203(a)(1) of the DGCL such that the provisions of Section 203 of the DGCL will not apply to this Agreement or the Option Agreements or any of the transactions contemplated hereby or thereby.

6.19 Year 2000 Compliance. Lycos has adopted and implemented a commercially reasonable plan to provide (A) that the change of the year from 1999 to the year 2000 will not materially and adversely affect the information and business systems or online operations of Lycos or its Subsidiaries and (B) that the impacts of such change on the vendors and customers of Lycos and its Subsidiaries will not have a Material Adverse Effect on Lycos. In Lycos's reason-

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able best estimate, no expenditures materially in excess of currently budgeted items previously disclosed to TMCS will be required in order to cause the information and business systems of Lycos and its Subsidiaries to operate properly following the change of the year 1999 to the year 2000. Lycos reasonably expects that it will resolve any issues related to such change of the year in accordance with the timetable contemplated by such plan (and in any event on a timely basis in order to be resolved before the year 2000). Between the date of this Agreement and the Effective Time, Lycos shall continue to use all commercially reasonable efforts to implement such plan.

6.20 Certain Tax Matters. As of the date of this Agreement, Lycos has no reason to believe that the Reorganization and the Contribution, taken together, will not qualify as an exchange contemplated by Section 351 of the Code.

6.21 Registration Statement. None of the information supplied or to be supplied by Lycos in writing for inclusion or incorporation by reference in the S-4 will, at the time it becomes effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. If at any time prior to the date of the meeting of stockholders of Lycos held in connection with the adoption of this Agreement, or any adjournment thereof, any event with respect to Lycos, its officers and directors or any of its Subsidiaries shall occur which is required to be described in an amendment of,

or a supplement to the S-4, Lycos shall notify Newco and TMCS thereof by reference to this Section 6.21 and such event shall be so described. Any such amendment or supplement shall be promptly filed with the SEC and, as and to the extent required by law, disseminated to the stockholders of Lycos, and such amendment or supplement shall comply in all material respects with all provisions of the Securities Act.

6.22 Ownership of TMCS Capital Stock. Neither Lycos nor any of it Subsidiaries owns any shares of TMCS Capital Stock.

6.23 Opinion of Financial Advisors. The Board of Directors of Lycos has received the opinion, dated as of the date hereof, of Wasserstein Perella to the effect that the consideration to be received by holders of Lycos Common Stock in the Lycos Merger is fair to such holders from a financial point of view.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF PARENT, NEWCO, L MERGER SUB AND T MERGER SUB

Each of Parent, Newco, L Merger Sub and T Merger Sub hereby represents and warrants to Lycos and TMCS as follows:

7.1 Representations and Warranties of Parent and Newco. The representations and warranties of each of Parent and Newco set forth in the

Contribution Agreement are hereby incorporated herein by reference (including the disclosure schedules relating thereto) as if set forth

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herein, for the benefit of Lycos and TMCS as if made by Parent to each of Lycos and TMCS. True and complete copies of the Certificate of Incorporation of Newco have previously been made available by Parent or Newco to each of Lycos and TMCS. Parent has previously delivered to Lycos and TMCS a true and complete copy of the disclosure schedule delivered to Newco in connection with the Contribution Agreement.

7.2 Corporate Organization of Merger Subs. Each of the Merger Subs is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. True and complete copies of the Certificate of Incorporation of each of the Merger Subs have previously been made available by Parent or Newco to each of Lycos and TMCS. Neither Merger Sub has any Subsidiaries or investments in any entity.

7.3 Capitalization. The authorized capital stock of each Merger Sub consists of 1,000 shares of common stock. All of the issued and outstanding shares of each Merger Sub are owned by Newco free and clear of any Liens. All of the issued and outstanding shares of each Merger Sub have been duly authorized

and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. The Merger Subs do not have and are not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity securities thereof or any securities representing the right to purchase or otherwise receive any shares of such capital stock. As of the date hereof, no shares of capital stock of the Merger Subs were reserved for issuance.

7.4 Authority; No Violation. (a) Each of the Merger Subs has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved, and this Agreement has been duly and validly adopted, by the Board of Directors of each Merger Sub and by Newco as the sole shareholder thereof. Except for the filing by each Merger Sub with the Delaware Secretary of a certificate of merger with respect to the Mergers and the matters contemplated by Article I of this Agreement, no other corporate proceedings on the part of either Merger Sub are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each Merger Sub and (assuming due authorization, execution and delivery by the other parties hereto) constitutes a valid and binding obligation of each Merger Sub, enforceable against each Merger Sub in accordance with its terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of

creditors generally and the availability of equitable remedies).

(b) Neither the execution and delivery of this Agreement by either Merger Sub, nor the consummation by either Merger Sub of the transactions contemplated hereby, nor compliance by TMCS with any of the terms or provisions hereof, will violate any provision of the certificate by-laws of such Merger Sub or, assuming receipt of the consents and approvals referred to in Section 5.4, violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to such Merger Sub.

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7.5 Conduct of Business. Each of the Merger Subs and Newco is a corporation formed solely for the purpose of consummating the Transactions and has not engaged in any business activity except as contemplated by this Agreement and the Contribution Agreement.

7.6 Broker's Fees. Other than as set forth herein, neither Merger Sub nor any of their respective officers, directors or affiliates has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with the Mergers or related transactions contemplated by this Agreement, the Contribution Agreement or the Option Agreements.

ARTICLE VIII

COVENANTS RELATING TO CONDUCT OF BUSINESS

8.1 Conduct of Businesses Prior to the Effective Time. During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or permitted by this Agreement, the Contribution Agreement or the Option Agreements, or as disclosed in the TMCS Disclosure Schedule and the Lycos Disclosure Schedule, each of Lycos, TMCS, Newco, L Merger Sub and T Merger Sub shall, and shall cause each of their respective Subsidiaries to, (a) conduct its business in the ordinary course consistent with past practices, (b) use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships and retain the services of its key officers and key employees and (c) take no action which would adversely affect or delay the ability of either Lycos or TMCS to obtain any necessary approvals of any regulatory agency or other governmental authority required for the transactions contemplated hereby, perform its covenants and agreements under this Agreement or the Option Agreements or to consummate the transactions contemplated hereby or thereby or otherwise delay or prohibit consummation of the Transactions.

8.2 Forbearances. During the period from the date of this Agreement to the Effective Time, except as set forth in the Lycos Disclosure Schedule or the TMCS Disclosure Schedule, or as disclosed prior to the date hereof in the TMCS

Reports or the Lycos Reports, as the case may be, and, except as expressly contemplated by this Agreement, the Contribution Agreement or the Option Agreements, none of Lycos, TMCS, Newco, L Merger Sub and T Merger Sub shall, and none of Lycos, TMCS or Newco shall permit any of their respective Subsidiaries to, without the prior written consent of the other parties to this Agreement (provided that the consent of Parent shall be deemed to be the consent of Newco and the Merger Subs)

(a) other than in the ordinary course of business and amounts that are not material, incur any indebtedness for borrowed money (other than short-term indebtedness incurred to refinance short-term indebtedness and indebtedness of TMCS or any of its wholly-owned Subsidiaries to TMCS or any of its Subsidiaries, on the one hand, or of Lycos or any of its Subsidiaries to Lycos or any of its wholly-owned Subsidiaries, on the other hand), assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity, or make any loan or advance;

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(b) (i) adjust, split, combine or reclassify any capital stock;

(ii) make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire or encumber, any shares of its capital stock or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock, except in connection with cashless exercise or similar transactions pursuant to the exercise of stock options issued and outstanding as of the date hereof under the TMCS Stock Plans or Lycos Stock Plans;

(iii) grant any stock appreciation rights or grant any individual, corporation or other entity any right to acquire any shares of its capital stock, other than (A) in each case only in the ordinary course of business in connection with grants to employees, of options to acquire up to an aggregate of 500,000 shares of Lycos Common Stock issuable under the Lycos Stock Plans or an aggregate of 200,000 shares of TMCS Class B Common Stock issuable under the TMCS Stock Plans, and (B) in connection with the consummation of the transactions contemplated

by the Wired Merger Agreement as publicly disclosed as of the date hereof, in the case of Lycos; or

(iv) issue any additional shares of capital stock except pursuant to (A) the exercise of stock options under the TMCS Stock Plans or Lycos Stock Plans, as the case may be, issued and outstanding as of the date hereof, (B) the Option Agreements, in the case of Lycos, (C) in connection with the consummation of the transactions contemplated by the Wired Merger Agreement as publicly disclosed as of the date hereof, in the case of Lycos and (D) the conversion of shares of TMCS Class A Common Stock pursuant to the terms of the TMCS Charter, in the case of TMCS.

(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties or assets to any individual, corporation or other entity, other than to a wholly owned Subsidiary, or cancel, release or assign any indebtedness to any such person or any claims held by any such person, except pursuant to contracts or agreements in force at the date of this Agreement;

(d) except for transactions in the ordinary course of business or pursuant to contracts or agreements in force at the date of or expressly permitted by this Agreement, make any material investment or

acquisition, whether by purchase of stock or securities,

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contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation or other entity other than a Subsidiary thereof;

(e) except for transactions in the ordinary course of business, terminate, or amend or waive any material provision of, any TMCS Contract or Lycos Contract, as the case may be, or make any material change in any instrument or agreement governing the terms of any material lease or contract other than normal renewals of contracts and leases without material adverse changes of terms, or its securities;

(f) except in the ordinary course of business consistent with past practice, increase in any manner the compensation or fringe benefits of any of its employees or pay any pension, severance or retirement allowance not required by any existing plan or agreement to any such employees or become a party to, amend or commit itself to any pension, retirement, profit-sharing or welfare benefit plan or agreement or employment agreement with or for the benefit of any

employee, or accelerate the vesting of, or the lapsing of restrictions with respect to, any stock options or other stock-based compensation;

(g) settle any material claim, action or proceeding involving money damages, except in the ordinary course of business;

(h) knowingly take any action that would prevent or impede the Reorganization and the Contribution, taken together, from qualifying as an exchange contemplated by Section 351 of the Code;

(i) amend its certificate of incorporation or its bylaws, except that Newco may amend its Certificate of Incorporation to provide for the Newco Convertible Preferred Stock and to make the changes set forth in Section 2.3;

(j) take any action that is intended or would reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger set forth in Article X not being satisfied or in a violation of any provision of this Agreement;

(k) other than in the ordinary course of business consistent with past practices, (i) sell or enter into any material license agreement with respect to any Intellectual Property Rights used by it

in its business with any person or entity or buy or enter into any material license agreement with respect to the Intellectual Property Rights of any person or entity; (ii) sell or transfer to any person or entity any material rights to any Intellectual Property Rights used by it in its business; or (iii) enter into or materially amend any TMCS Contract or Lycos Contract, as the case may be, pursuant to which any other party is granted marketing or distribution rights of any type or scope with respect to any material products of its or any its Subsidiaries;

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(l) except to the extent permitted by Section 8.2(k), enter into any "non-compete" or similar agreement that would materially restrict the businesses of Newco following consummation of the Transactions;

(m) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of such entity (other than the Transactions);

(n) implement or adopt any change in its accounting principles, practices or methods, other than as may be required by GAAP or regulatory guidelines; or

(o) agree to take, make any commitment to take, or adopt any resolutions of its board of directors in support of, any of the actions prohibited by this Section 8.2.

ARTICLE IX ADDITIONAL AGREEMENTS

9.1 Regulatory Matters. (a) Newco, Lycos and TMCS shall promptly prepare and file with the SEC the Proxy/Information Statement, and Newco shall promptly prepare and file with the SEC the S-4, in which the Proxy/Information Statement will be included as a prospectus. Newco shall use its reasonable best efforts to have the S-4 declared effective under the Securities Act as promptly as practicable after such filing, and Lycos and TMCS shall thereafter mail or deliver the Proxy/Information Statement to their respective stockholders. Newco shall use its reasonable best efforts to obtain all necessary state securities law or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement, and Lycos and TMCS shall furnish all information concerning Lycos and the holders of Lycos Capital Stock, or TMCS and the holders of TMCS Capital Stock, as the case may be, as may be reasonably requested in connection with any such action.

(b) The parties hereto shall cooperate with each other and use their reasonable best efforts to promptly prepare and file all necessary

documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities which are necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Mergers) and the Option Agreements, and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such Governmental Entities. Parent, Lycos and TMCS shall have the right to review in advance, and, to the extent practicable, each will consult the other on, in each case subject to applicable laws relating to the exchange of information, all the information relating to Parent, TMCS or Lycos, as the case may be, and any of their respective Subsidiaries, which appear in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions con-

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templated by this Agreement and the Option Agreements and each party will keep

the other apprised of the status of matters relating to completion of the transactions contemplated herein.

(c) Newco, Lycos and TMCS shall, upon request, furnish the other parties hereto with all information concerning themselves, their Subsidiaries, affiliates, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Proxy/Information Statement, the S-4 or any other statement, filing, notice or application made by or on behalf of Newco, Lycos, TMCS or any of their respective Subsidiaries to any Governmental Entity in connection with the Transactions contemplated by this Agreement.

(d) Lycos and TMCS shall, and Parent shall cause Newco to, promptly advise the other parties hereto upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the transactions contemplated by this Agreement or the Option Agreements that causes such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be obtained or that the receipt of any such approval will be materially delayed.

9.2 Access to Information. (a) Upon reasonable notice and subject to applicable laws relating to the exchange of information, each of the parties hereto, for the purposes of verifying the representations and warranties of the other and preparing for the Merger and the other matters contemplated by this Agreement and the Contribution Agreement, shall, and shall cause each of their

respective Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of the other parties, access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, each of the parties hereto shall, and shall cause their respective Subsidiaries to, make available to the other parties (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws (other than reports or documents which such party is not permitted to disclose under applicable law) and (ii) all other information concerning its business, properties and personnel as such party may reasonably request. No party hereto shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of its customers, jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.

(b) Each of the parties hereto shall hold all information furnished by or on behalf of any other party or any of such party's Subsidiaries or representatives pursuant to Section 9.2(a) in confidence to the extent required by, and in accordance with, the provisions of the confidentiality agreement, among Parent, Lycos and TMCS (the "Confidentiality Agreement").

(c) No investigation by any of the parties or their respective representatives shall affect the representations and warranties of the other set forth herein.

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9.3 No Solicitation. Without the prior written consent of Newco and TMCS, Lycos shall not, and shall cause its Subsidiaries and its and its Subsidiaries' officers, directors, agents, advisors and affiliates not to, solicit or encourage inquiries or proposals with respect to, or engage in any negotiations concerning, or provide any confidential information to, or have any discussions with, any person relating to any tender offer or exchange offer for, or any proposal for the acquisition of a substantial equity interest in, or of a substantial portion of the assets of, or any merger, consolidation or other business combination with, Lycos or any of its Subsidiaries. Lycos shall promptly, but in any event within 24 hours, advise Newco and TMCS of its receipt of any such proposal or inquiry, of the substance thereof, and of the identity of the person making such proposal or inquiry. Lycos shall immediately cease and cause to be terminated any activities, discussions or negotiations conducted prior to the date of this Agreement with any parties other than the parties hereto with respect to any of the foregoing.

9.4 Stockholders' Approvals. (a) Lycos shall call a meeting of its

stockholders to be held as soon as reasonably practicable for the purpose of obtaining the requisite stockholder approval required in connection with this Agreement and the Lycos Merger, and shall use its reasonable best efforts to cause such meetings to occur as soon as reasonably practicable. The Board of Directors of Lycos shall use its reasonable best efforts to obtain from the stockholders of Lycos the vote in favor of the adoption of this Agreement required by the DGCL to consummate the transactions contemplated hereby, and shall recommend to the stockholders of Lycos that they so vote; provided that the Board of Directors shall not be required to use such reasonable best efforts to obtain the vote in favor of the adoption of this Agreement or to make or continue to make such recommendation if such Board of Directors, after having consulted with and considered the advice of outside counsel, has determined that the making of such reasonable best efforts to obtain the vote in favor of the adoption of this Agreement or making or continuing to make such recommendation would cause the members of the Board of Directors of Lycos to breach their fiduciary duties under applicable laws.

(b) Promptly after the date hereof (but in no event later than the date on which the S-4 is filed with the SEC), Parent shall vote or cause to be voted all shares of TMCS Class A Common Stock and TMCS Class B Common Stock owned by it, or of which it otherwise is entitled to direct the voting, in favor of the adoption of this Agreement. Parent represents and warrants to Lycos and TMCS that such shares represent voting power sufficient to obtain the requisite vote of TMCS stockholders in favor of the adoption of this Agreement under the DGCL.

9.5 Legal Conditions to Merger. Each of Parent, Newco, Lycos and TMCS shall, and shall cause its Subsidiaries to, use their reasonable best efforts (a) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements that may be imposed on such party or its Subsidiaries with respect to the Merger and, subject to the conditions set forth in Article X hereof, to consummate the transactions contemplated by this Agreement, and (b) to obtain (and to cooperate with the other party to obtain) any material consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party that is required to be obtained by Parent, Newco, TMCS or Lycos or any of their respective Subsidiaries in connection with the Merger and the other transactions contemplated by this Agreement or the Contribution Agreement. Without limiting the foregoing, Parent, Newco,

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Lycos and TMCS agree to use reasonable best efforts to cooperate to effect any amendments to, or obtain any consents under, the Lycos Option Plans and the TMCS Option Plans as are necessary or desirable to give effect to the provisions of Article III with respect to the options granted under such plans.

9.6 Affiliates. Each of Lycos and TMCS shall use its reasonable best efforts to cause each director, executive officer and other person who is an "affiliate" (for purposes of Rule 145 under the Securities Act) of such party to

deliver to Newco, as soon as practicable after the date of this Agreement, and in any event prior to the Effective Time, a written agreement, in the form of Exhibit 9.6(a) or 9.6(b) hereto, as applicable, providing that such person will not sell, pledge, transfer or otherwise dispose of any shares of Newco Series A Common Stock, Newco Series B Common Stock or Newco Convertible Preferred Stock to be received by such "affiliate" in the Merger, other than as contemplated in such written agreement.

9.7 Nasdaq Quotation. Newco shall use reasonable best efforts to cause the shares of Newco Common Stock and Newco Convertible Preferred Stock to be issued in the Mergers to be authorized for quotation on Nasdaq, subject to official notice of issuance, prior to the Effective Time.

9.8 Employee Benefit Plans. (a) From and after the Effective Time, unless otherwise mutually determined, the TMCS Benefit Plans and Lycos Benefit Plans in effect as of the date of this Agreement shall remain in effect with respect to employees of TMCS or Lycos (or their Subsidiaries), respectively, covered by such plans at the Effective Time until such time as the Surviving Corporations and Newco shall, subject to applicable law, the terms of this Agreement and the terms of such plans, adopt new benefit plans with respect to employees of Newco and its Subsidiaries (the "New Benefit Plans"). Prior to the Closing Date, Parent, TMCS and Lycos shall cooperate in reviewing, evaluating and analyzing the Lycos Benefit Plans and TMCS Benefit Plans with a view towards developing appropriate New Benefit Plans for the employees covered thereby. Newco will, or will cause the Surviving Corporations to, (i) waive all

limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to employees of TMCS and Lycos under any welfare plan that such employees may be eligible to participate in after the Effective Time, to the extent that such conditions would have been waived under the corresponding welfare plan in which any such employee participated immediately prior to the Effective Time, (ii) provide each employee of TMCS or Lycos with credit for any co-payments and deductibles paid prior to the Effective Time, for the calendar year in which the Effective Time occurs, in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Effective Time, and (iii) provide each employee with credit for all service for purposes of eligibility, vesting and benefit accruals (but not for benefit accruals under any defined benefit pension plan) with TMCS or Lycos and their affiliates, as applicable, under each employee benefit plan, program, or arrangement of Newco, the Surviving Corporation or their subsidiaries in which such employees are eligible to participate in after the Effective Time; provided, however, that in no event shall the employees be entitled to any credit to the extent that it would result in a duplication of benefits with respect to the same period of service.

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(b) The foregoing notwithstanding, Newco shall, and shall cause the Surviving Corporations to, honor in accordance with their terms all benefits

accrued as of the date hereof under the Lycos Benefit Plans or the TMCS Benefit Plans or under other contracts, arrangements, commitments, or understandings described in the Lycos Disclosure Schedule and the TMCS Disclosure Schedule.

(c) Unless mutually agreed upon by the parties hereto, TMCS shall terminate the TMCS 1998 Employee Stock Purchase Plan prior to Effective Time and a "new exercise date" under such plan shall occur prior to the Effective Time, and Lycos shall terminate the Lycos 1996 Employee Stock Purchase Plan and the "exercise date" under such plan shall occur prior to the Effective Time.

(d) Nothing in this Section 9.8 shall be interpreted as preventing the Surviving Corporations from amending, modifying or terminating any Lycos Benefit Plans, TMCS Benefit Plans, or other contracts, arrangements, commitments or understandings, in accordance with their terms and applicable law.

9.9 Indemnification; Directors' and Officers' Insurance. (a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, any such claim, action, suit, proceeding or investigation in which any individual who is now, or has been at any time prior to the date of this Agreement, or who becomes prior to the Effective Time, a director or officer of Lycos or any of its Subsidiaries or of TMCS or any of its Subsidiaries (the "Indemnified Parties"), is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he is or was a director or officer of Lycos or any of its Subsidiaries

or TMCS or any of its Subsidiaries or any of their respective predecessors or (ii) this Agreement, the Contribution Agreement, the Option Agreements or any of the transactions contemplated hereby or thereby, whether in any case asserted or arising before or after the Effective Time, the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto. It is understood and agreed that after the Effective Time, Newco shall indemnify and hold harmless, as and to the fullest extent permitted by law, each such Indemnified Party against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorney's fees and expenses in advance of the final disposition of any claim, suit, proceeding or investigation to each Indemnified Party to the fullest extent permitted by law upon receipt of any undertaking required by applicable law), judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation.

(b) Newco shall use its reasonable best efforts to cause the individuals serving as officers and directors of Lycos and its Subsidiaries, or officers and directors of TMCS and its Subsidiaries, in each case, immediately prior to the Effective Time to be covered for a period of three (3) years from the Effective Time (or the period of the applicable statute of limitations, if longer) by the directors' and officers' liability insurance policy maintained by Lycos or TMCS, as the case may be (provided that Newco may substitute therefor policies of at least the same coverage and amounts containing terms and conditions in the aggregate which are not in the aggregate less advantageous than such policy and that Newco shall not be obligated to pay annual premiums in

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excess of 300% of the last annual premium paid by TMCS or Lycos, as the case may be) with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such.

(c) In the event Newco or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Newco assume the obligations set forth in this Section 9.9.

(d) The provisions of this Section 9.9 shall survive the Effective Time and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives.

9.10 Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporations or Newco with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the Merger, the proper officers and directors of each party to

this Agreement and their respective Subsidiaries shall take all such necessary action as may be reasonably requested by, and at the sole expense of, Newco.

9.11 Advice of Changes. Lycos and TMCS shall each promptly advise the other parties hereto of any change or event (a) having a Material Adverse Effect on it or (b) which it believes would or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties or covenants contained herein.

9.12 Section 16. Each of Lycos and TMCS shall, reasonably promptly following the date hereof, provide to Newco a list of (a) the directors and officers (as such terms are used under Section 16 of the Exchange Act and the rules and regulations of the SEC thereunder) of such company, (b) the number of shares of Newco Common Stock and Newco Class B Common Stock and options thereon and the number of shares of Newco Convertible Preferred Stock (together, the "Section 16 Securities") expected to be received pursuant to the Reorganization by each such officer or director at the Effective Time on account of shares of Lycos Common Stock, TMCS Class A Common Stock or TMCS Class B Common Stock, as the case may be, reasonably expected to be held by such directors and officers immediately prior to the Effective Time and (c) a description of the material terms of such options. Prior to the Effective Time, the Newco Board of Directors shall take such action consistent with the SEC's interpretive guidance to approve the issuance of the Section 16 Securities to each such director and officer of such company for purposes of Rule 16b-3(d) under the Exchange Act such that the deemed "purchase" of such Section 16 Securities by such persons

pursuant to the Reorganization shall be exempt from liability pursuant to Section 16(b) of the Exchange Act.

9.13 Contribution Agreement. Newco shall not amend or enter into any agreement amending the Contribution Agreement, or waive or modify any of the rights and obligations of any of the parties thereunder, without the prior written consent of each of Lycos and a majority

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of the independent directors of TMCS. Parent and Newco agree to cause the consummation of the Contribution immediately following the satisfaction, or waiver in compliance with this Agreement, of the conditions set forth in Article VI of the Contribution Agreement.

9.14 Other Businesses. (a) Subject to paragraph (b) below, neither anything contained in this Agreement nor the ownership of shares of Newco Common Stock (except as may be provided in the Newco certificate of incorporation) shall (i) restrict Parent or any of its Subsidiaries from engaging in or owning an interest in any business which competes with Newco or any Subsidiary of Newco, or (ii) restrict Newco or any of its Subsidiaries from engaging in or owning an interest in any business which competes with Parent or any of its Subsidiaries.

(b) From and after the date hereof, until such time as Parent no longer owns, directly or indirectly (including through LLC), a number of shares of Newco Common Stock and/or Newco Class B Common Stock (including shares of Newco Common Stock acquired by Parent, the LLC and their Subsidiaries after the date hereof) equal to at least one-third of the number of shares of Newco Class B Common Stock issued to Parent, LLC or Parent's other Subsidiaries in connection with the Transactions (such number of shares, as equitably adjusted to reflect any stock split, stock dividend or similar event affecting Newco Common Stock, the "Parent Sunset Threshold"), Parent agrees, subject to the next sentence below, that all business opportunities relating to online activities, automated ticketing services and on-air home shopping businesses (other than such activities, services and businesses that are incidental to Parent's other lines of business, such as USA.com and SciFi.com) will be conducted in Newco and its Subsidiaries. However, the preceding sentence shall not apply if Newco has rejected such business opportunity.

(c) In the event that Parent acquires a business that has, as part of it, a substantial business described in paragraph (b) above (other than a business described in the last sentence of paragraph (b) above), Parent shall use its commercially reasonable best efforts to cause such portion of the acquired business to be available to be acquired by Newco, or otherwise operated or managed by Newco in order to permit Newco the benefit of such businesses on such terms as the parties may mutually agree, using their respective commercially reasonable best efforts and good faith to negotiate such terms.

(d) For the avoidance of doubt, the restrictions contained in this Section 9.14 shall not apply to Universal Studios, Inc. and Liberty Media Corp. and their respective affiliates (other than Parent and the LLC, and their respective Subsidiaries).

9.15 Affiliate Sales Agreement. Consistent with past practice, Parent shall continue to secure, at Newco's direction and request, carriage as available for The Home Shopping Network ("HSN") on cable systems or broadcast stations. Parent shall charge Newco for such services an amount equal to allocated overhead at cost plus a nominal service fee, such service fee to be in such amounts as is consistent with the past practice between Parent and HSN. In fulfilling its obligations under the first sentence of this paragraph, Parent shall use commercially reasonable efforts, acting in good faith, to secure such coverage at the most favorable rates, and on the most favorable terms, available to Parent.

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9.16 Limitations on Sale of Parent Shares. Parent, on its behalf and on behalf of LLC and their respective Subsidiaries, agrees that, during the 10 trading days preceding and following each measurement period (as defined in the Certificate of Designations with respect to Newco Convertible Preferred Stock), it will not sell (other than in private transactions), or permit the

announcement of an anticipated sale in the open market of, any shares of Newco Common Stock or Newco Class B Common Stock owned by such entities (other than to another Subsidiary of Parent or LLC). During each measurement period, Parent shall be permitted to so effect sales of shares of Newco Common Stock or Newco Class B Common Stock (either through conversion into shares of Newco Common Stock or otherwise), provided that the aggregate number of shares sold during any one measurement period does not exceed the greater of (i) 1% of the outstanding shares of Newco Common Stock or (ii) the average weekly volume over the four-week period immediately preceding the commencement of such measurement period. Notwithstanding the provisions of this Section 9.16, Parent, the LLC and their respective Subsidiaries shall be permitted to enter into and effect sales of shares of Newco stock during the Second Measurement Period and the Third Measurement Period (each as defined in the Newco Convertible Preferred Stock Designations) which are effected in private transactions.

9.17 Promotion. It is the intention of the Parent to cause its Subsidiaries to endeavor to promote the businesses of Newco.

ARTICLE X

CONDITIONS PRECEDENT

10.1 Conditions to Each Party's Obligation to Effect the Mergers. The respective obligations of the parties to effect the Mergers shall be subject to

the satisfaction at or prior to the Effective Time of the following conditions:

(a) Stockholder Approval. This Agreement shall have been adopted by the respective requisite affirmative vote of the holders of Lycos Common Stock entitled to vote thereon.

(b) Nasdaq Listings. The shares of Newco Common Stock and Newco Convertible Preferred Stock which shall be issued to the stockholders of Lycos and TMCS upon consummation of the Mergers shall have been authorized for quotation on Nasdaq, subject to official notice of issuance.

(c) Other Approvals. All regulatory approvals required to consummate the transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods being referred to herein as the "Requisite Regulatory Approvals").

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(d) S-4. The S-4 shall have become effective under the Securities Act and no stop order suspending the effectiveness of the S-4 shall have been issued and no proceedings for that purpose shall

have been initiated or threatened by the SEC.

(e) No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition (an "Injunction") preventing the consummation of the Mergers or any of the other transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits, materially restricts or makes illegal consummation of the Merger.

(f) No Conditions to the Contribution. All of the conditions (other than the conditions set forth in Sections 6.1(a) and 6.2(c) of the Contribution Agreement) to the obligations of the parties to the Contribution Agreement to consummate the Contribution shall have been satisfied (or waived, but only to the extent permitted by this Agreement), and each of Lycos and TMCS shall have received a certificate executed on behalf of Parent by an appropriate executive by an officer of Parent and Newco to such effect.

10.2 Conditions to Obligations of Lycos. The obligations of Lycos to effect the Lycos Merger are also subject to the satisfaction, or waiver by Lycos, at or prior to the Effective Time, of the following conditions:

(a) Representations and Warranties. Subject to the standard set forth in Section 12.10(b), the representations and warranties of TMCS and Newco set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. Lycos shall have received a certificate signed on behalf of each of TMCS and Newco by an appropriate executive officer of each company to such effect.

(b) Performance of Obligations of TMCS. Each of TMCS and Newco shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Lycos shall have received a certificate signed on behalf of each of TMCS and Newco by an appropriate executive officer of each company to such effect.

(c) Federal Tax Opinion. Lycos shall have received an opinion of Wachtell, Lipton, Rosen & Katz, dated the Closing Date, substantially to the effect that (i) the Reorganization and the Contribution, taken together, will constitute an exchange described in Section 351(a) or 351(b) of the Code and (ii) no gain or loss will be recognized by the stockholders of Lycos upon the receipt of shares of Newco Common Stock in exchange for their shares of Lycos Common Stock pursuant to the Lycos Merger, except to the extent of other property or

money received and with respect to cash received in lieu of a fractional share interest in Newco Common Stock.

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10.3 Conditions to Obligations of TMCS and Newco. The obligations of TMCS to effect the TMCS Merger and the obligations of Newco to effect the Mergers are also subject to the satisfaction or waiver by TMCS and Newco at or prior to the Effective Time of the following conditions:

(a) Representations and Warranties. Subject to the standard set forth in Section 12.10(b), the representations and warranties of Lycos set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. TMCS and Newco shall each have received a certificate signed on behalf of Lycos by its Chief Executive Officer or Chief Financial Officer to such effect.

(b) Performance of Obligations of Lycos. Lycos shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and TMCS and Newco shall each have received a certificate signed on

behalf of Lycos by its Chief Executive Officer or its Chief Financial Officer to such effect.

(c) Federal Tax Opinion. TMCS shall have received an opinion of Gibson, Dunn & Crutcher, dated the Closing Date, substantially to the effect that (i) the Reorganization and the Contribution, taken together, will constitute an exchange described in Section 351(a) or 351(b) of the Code and (ii) no gain or loss will be recognized by the stockholders of TMCS upon the receipt of shares of Newco Common Stock or Newco Class B Common Stock in exchange for their shares of TMCS Class A Common Stock or TMCS Class B Common Stock pursuant to the TMCS Merger, except to the extent of other property or money received and with respect to cash received in lieu of a fractional share interest in Newco Common Stock or Newco Class B Common Stock.

ARTICLE XI

TERMINATION AND AMENDMENT

11.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Mergers by the stockholders of Lycos or TMCS:

(a) by mutual consent of Lycos, TMCS and Newco in a written

instrument;

(b) by any of Newco, Lycos or TMCS if any Governmental Entity that must grant a Requisite Regulatory Approval has denied approval of the Mergers and such denial has become final and nonappealable or any Governmental Entity of competent jurisdiction shall have issued a final nonappealable order permanently enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement;

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(c) by any of Newco, Lycos or TMCS, if the approval of the Lycos stockholders required by Section 10.1(a) shall not have been obtained at a meeting duly convened therefor or at any adjournment thereof;

(d) by Newco, Lycos or TMCS if the Transactions shall not have been consummated on or before the first anniversary of the date of this Agreement, unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth herein; or

(e) by any of Newco, Lycos or TMCS (provided that the

terminating party is not then in breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a breach of any of the covenants or agreements or any of the representations or warranties set forth or expressly incorporated in this Agreement on the part of Parent, Newco or TMCS, in the case of a termination by Lycos; Parent, Newco or Lycos, in the case of a termination by TMCS, or TMCS or Lycos, in the case of a termination by Newco, which breach, either individually or in the aggregate, would constitute, if occurring or continuing on the Closing Date, the failure of the conditions set forth in Section 10.1(f), 10.2(a), 10.2(b), 10.3(a) or 10.3(b), as the case may be, and which is not cured within 30 days following written notice to the party committing such breach or by its nature or timing cannot be cured prior to the Closing Date.

11.2 Effect of Termination. In the event of termination of this Agreement by either Lycos or TMCS as provided in Section 11.1, this Agreement shall forthwith become void and have no effect, and none of Parent, Newco, L Merger Sub, T Merger Sub, Lycos, TMCS, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except that (i) Sections 9.2(b), 11.2, 12.1 and 12.2 shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement, no party shall be relieved or released from any liabilities or damages arising out of its willful breach of any provision of this Agreement.

11.3 Amendment. Subject to compliance with applicable law, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Mergers by the stockholders of Lycos and TMCS; provided, however, that after any approval of the transactions contemplated by this Agreement by the respective stockholders of Lycos or TMCS, there may not be, without further approval of such stockholders, any amendment of this Agreement that changes the amount or the form of the consideration to be delivered hereunder to the holders of Lycos Common Stock, TMCS Class A Common Stock or TMCS Class B Common Stock, other than as contemplated by this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. No amendment of this Agreement by TMCS shall be effective unless approved by the independent members of the TMCS Board of Directors.

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11.4 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Board of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance

with any of the agreements or conditions contained herein; provided, however, that after any approval of the transactions contemplated by this Agreement by the respective stockholders of Lycos or TMCS, there may not be, without further approval of such stockholders, any extension or waiver of this Agreement or any portion thereof which reduces the amount or changes the form of the consideration to be delivered to the holders of Lycos Common Stock, TMCS Class A Common Stock or TMCS Class B Common Stock, hereunder, other than as contemplated by this Agreement. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. No extension or waiver pursuant to this Agreement by TMCS shall be effective unless approved by the independent members of the TMCS Board of Directors.

ARTICLE XII

GENERAL PROVISIONS

12.1 Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement (other than the Option Agreements and the Confidentiality Agreement, which shall terminate in

accordance with their terms) shall survive the Effective Time, except for Sections 3.4, 3.5, 3.6, 9.9, the last sentence of Section 9.13, 9.14, 9.15, 9.16 and 9.17 and for those other covenants and agreements contained herein and therein which by their terms apply in whole or in part after the Effective Time.

12.2 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense, provided, however, that the costs and expenses of printing and mailing the Proxy/Information Statement, and all filing and other fees paid to the SEC in connection with the Merger, shall be borne equally by Parent, Lycos and TMCS.

12.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

-50<PAGE>

(a) if to Lycos, to:

Lycos, Inc.

400-2 Totten Pond Road Waltham, MA 02460 Attention: General Counsel Telecopier: 781-370-2600

with a copy to:

Testa, Hurwitz & Thibeault, LLP High Street Tower 125 High Street Boston, MA 02110 Attention: Mark H. Burnett, Esq. Kenneth J. Gordon, Esq. Telecopier: 617-248-7100;

(b) if to TMCS, to:

Ticketmaster Online-CitySearch, Inc. 790 East Colorado Boulevard, Suite 200 Pasadena, CA 91101 Attention: General Counsel Telecopier: 626-405-9929

with a copy to:

Gibson, Dunn & Crutcher LLP 333 S. Grand Avenue Los Angeles, CA 90071 Attention: Andrew E. Bogen, Esq. Telecopier: 213-229-7520

and

(c) if to Parent or Newco, to:

c/o USA Networks, Inc. 152 West 57th Street New York, NY 10019 Attention: General Counsel Telecopier: 212-314-7329

-51<PAGE>

with a copy to:

Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, NY 10019 Attention: Pamela S. Seymon, Esq.

Andrew J. Nussbaum, Esq. Telecopier: 212-403-2000

12.4 Interpretation. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." Notwithstanding anything to the contrary in this Agreement or the Option Agreements, nothing herein or therein shall require any party hereto or thereto to take any action in violation of law.

12.5 Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

12.6 Entire Agreement. This Agreement (including the documents and the instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof other than the Contribution Agreement, the Option Agreements and the Confidentiality Agreement.

12.7 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law principles.

12.8 Publicity. Except as otherwise required by applicable law or the rules of Nasdaq, none of the parties hereto shall, or shall permit any of its Subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to, or otherwise make any public statement concerning, the transactions contemplated by this Agreement without the consent of the other parties hereto, which consent shall not be unreasonably withheld (provided that the consent of Parent shall be deemed to be the consent of Newco and the Merger Subs).

12.9 Assignment; Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Except as otherwise specifically

-52<PAGE>

provided in Section 9.9, this Agreement (including the documents and instruments referred to herein) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder.

12.10 Standards; Disclosure Schedules. (a) Prior to the execution and delivery of this Agreement, Lycos delivered the Lycos Disclosure Schedule to TMCS and Newco, and TMCS delivered the TMCS Disclosure Schedule to Lycos and Newco, each of which disclosure schedule sets forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more of such party's representations or warranties contained in Article V, in the case of TMCS, or Article VI, in the case of Lycos, or to one or more of such party's covenants contained in Article VII; provided, however, that notwithstanding anything in this Agreement to the contrary, (i) no such item is required to be set forth in a Disclosure Schedule as an exception to a representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect under the standard set forth in Section 10.2(a) or Section 10.3(a), as the case may be, and (ii) the mere inclusion of an item in a Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by a party that such item represents a material exception or a material fact, event or circumstance or that such item has had or would have had a Material Adverse Effect with respect to Lycos or TMCS, as the case may be; provided, further, that no Disclosure Schedule or other information, or modification thereof, that is

provided following the execution and delivery of this Agreement by the parties hereto shall be deemed to modify any representation, warranty or covenant set forth herein or in the Contribution Agreement.

(b) No representation or warranty of TMCS contained in Article V (except for Section 5.7(a) and representations relating to the capitalization of TMCS in Section 5.2) or of Lycos contained in Article VI (except for Section 6.7(a) and representations relating to the capitalization of Lycos in Section 6.2) shall be deemed untrue or incorrect for any purpose under this Agreement, and no party hereto shall be deemed to have breached a representation or warranty for any purpose under this Agreement, in any case, as a consequence of the existence or absence of any fact, circumstance or event unless such fact, circumstance or event, individually or when taken together with all other facts, circumstances or events inconsistent with any representations or warranties contained in Article V, in the case of TMCS, or Article VI, in the case of Lycos, has had a Material Adverse Effect with respect to TMCS or Lycos, respectively. For all purposes of determining whether any facts or events contravening a representation or warranty contained herein constitute, individually or in the aggregate, a Material Adverse Effect, representations and warranties contained in Article V (other than Section 5.7(a) and the capitalization representations) or Article VI (other than Section 6.7(a) and the capitalization representations) shall be read without regard to any reference to materiality or Material Adverse Effect set forth therein.

(c) The foregoing standards of this Section 12.10 shall apply, mutatis

mutandis, to the representations and warranties of Parent and Newco contained herein.

-53<PAGE>

IN WITNESS WHEREOF, Parent, Lycos, TMCS, Newco, L Merger Sub and T Merger Sub have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.

USA NETWORKS, INC.

By: /s/ Victor A. Kaufman --------------------------------------Name: Victor A. Kaufman Title: Office of the Chairman and Chief Financial Officer

LYCOS, INC.

By: /s/ Robert M. Davis --------------------------------------Name: Robert M. Davis Title: President and Chief Executive Officer

TICKETMASTER ONLINE-CITYSEARCH, INC.

By: /s/ Michael Guttentag --------------------------------------Name: Michael Guttentag Title: Vice President - Business Development

USA INTERACTIVE INC.

By: /s/ Dara Khosrowshahi --------------------------------------Name: Dara Khosrowshahi

Title: Vice President and Treasurer

[Agreement and Plan of Reorganization]

-54<PAGE>

LEMMA, INC.

By: /s/ Dara Khosrowshahi --------------------------------------Name: Dara Khosrowshahi Title: President

TYCHO, INC.

By: /s/ Dara Khosrowshahi --------------------------------------Name: Dara Khosrowshahi Title: President

[Agreement and Plan of Reorganization]

-55<PAGE>

Exhibit B

FORM OF

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

OF SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK

OF

USA/LYCOS INTERACTIVE NETWORKS, INC.

Pursuant to Section 151 of the General Corporation Law of the State of Delaware

USA/Lycos Interactive Networks, Inc., a Delaware corporation (the "Corporation"), certifies that pursuant to the authority contained in

Article [FOURTH] of its Certificate of Incorporation, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors has adopted the following resolution creating a series of its Preferred Stock, par value $0.01 per share, designated as Series A Convertible Redeemable Preferred Stock:

RESOLVED, that a series of the class of authorized Convertible Redeemable Preferred Stock, par value $0.01 per share, of the Corporation be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows:

Section 1. Designation and Amount. The shares of such series shall be designated as the "Series A Convertible Redeemable Preferred Stock" (the "Series A Convertible Preferred Stock") and the number of shares constituting such series shall be _________.

Section 2. Dividends. The holders of shares of Series A Convertible Preferred Stock shall not be entitled to receive dividends with respect to such shares.

Section 3. Voting Rights. Except as provided by law or as may otherwise be provided in the Certificate of Incorporation of the Corporation or in any amendment thereto, the holders of shares of Series A Convertible

Preferred Stock shall not be entitled to any voting rights as stockholders with respect to such shares.

Section 4. Redemption.

(a) Shares of Series A Convertible Preferred Stock shall not be redeemable except as provided in this Section 4.

(b) If as of the 39-month anniversary following the date of the initial issuance of the shares of Series A Convertible Preferred Stock (the "Initial Issuance Date"), the Average Market Price (as defined in Section 9) is less than or equal to the First Target

<PAGE>

Price (as defined in Section 9), the Board of Directors of the Corporation shall direct that all of the shares of Series A Convertible Preferred Stock then outstanding be redeemed by paying therefor in cash $0.01 per share.

(c) On the date that redemption is being made pursuant to paragraph (b) of this Section 4, the Corporation shall deposit for the benefit of the holders of shares of Series A Convertible Preferred Stock the funds necessary for such redemption with a bank or trust company in the Borough of Manhattan, the City of New York, having a

capital and surplus of at least $500,000,000. Any monies so deposited by the Corporation and unclaimed at the end of one year from the date designated for such redemption shall revert to the general funds of the Corporation. After such reversion, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof and any holder of shares of Series A Convertible Preferred Stock shall look only to the Corporation for the payment of the redemption price. Any interest accrued on funds deposited pursuant to this paragraph (c) shall be paid from time to time to the Corporation for its own account.

(d) Upon the deposit of funds pursuant to paragraph (c) in respect of shares of Series A Convertible Preferred Stock being redeemed pursuant to paragraph (b) of this Section 4, notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding, and all rights of the holders of shares of Series A Convertible Preferred Stock shall cease and terminate, excepting only the right to receive the redemption price therefor.

Section 5. Reacquired Shares. Any shares of Series A Convertible Preferred Stock converted, redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their

cancellation, and upon the filing of an appropriate certificate with the Secretary of State of the State of Delaware, become authorized but unissued shares of Preferred Stock, par value $0.01 per share, of the Corporation and may be reissued as part of another series of Preferred Stock, par value $0.01 per share, of the Corporation subject to the conditions or restrictions on issuance set forth herein.

Section 6. Liquidation, Dissolution or Winding Up.

(a) Except as provided in paragraph (b) of this Section 6, upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of capital stock of the Corporation ranking junior (upon liquidation, dissolution or winding up) to the Series A Convertible Preferred Stock unless, prior thereto, the holders of shares of Series A Convertible Preferred Stock shall have received the Liquidation Value with respect to such shares or (ii) to the holders of shares of capital stock ranking on a parity (upon liquidation, dissolution or winding up) with the Series A Convertible Preferred Stock, except distributions made ratably on the Series A Convertible Preferred Stock and all such parity stock in proportion to the total amounts to

2 <PAGE>

which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. For purposes of this Section 6, the Liquidation Value shall be $0.01 per share.

(b) If the Corporation shall commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or State bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or State bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of 90 consecutive days and on account of any such event the Corporation shall liquidate, dissolve or wind up, no distribution shall be made (i) to the holders of shares of capital stock of the Corporation ranking junior (upon liquidation, dissolution or winding up) to the Series A

Convertible Preferred Stock unless, prior thereto, the holders of shares of Series A Convertible Preferred Stock shall have received the Liquidation Value with respect to such shares or (ii) to the holders of shares of capital stock ranking on a parity (upon liquidation, dissolution or winding up) with the Series A Convertible Preferred Stock, except distributions made ratably on the Series A Convertible Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.

(c) Neither the consolidation, merger or other business combination of the Corporation with or into any other Person or Persons nor the sale of all or substantially all of the assets of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 6.

Section 7. Conversion. On the Conversion Date, each share of Series A Convertible Preferred Stock shall automatically be converted into the right to receive shares of common stock, par value $.01 per share, of the Corporation ("Common Stock"), on the terms and conditions set forth in this Section 7.

(a) Subject to the provisions for adjustment hereinafter set forth, each share of Series A Convertible Preferred Stock shall be converted into the right to receive a number of fully paid and

nonassessable shares of Common Stock equal to the "Conversion Ratio," which shall initially be equal to one (1) and which shall be subject to adjustment as provided in this Section 7.

(b) The Conversion Ratio shall be subject to adjustment from time to time as follows:

3 <PAGE>

(i) In case the Corporation shall at any time or from time to time declare a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock or subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares or combine or reclassify the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, and in each such case, the Conversion Ratio shall be adjusted to equal the number determined by multiplying (A) the Conversion Ratio immediately prior to such adjustment by (B) a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after such dividend, distribution, subdivision or reclassification, and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such dividend,

distribution, subdivision or reclassification. An adjustment made pursuant to this clause (i) shall become effective (A) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (B) in the case of any such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective.

(ii) In case the Corporation shall at any time or from time to time declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities, cash or other property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spinoff, but excluding regular ordinary cash dividends as may be declared from time to time by the Corporation) on its Common Stock, other than shares of Common Stock which are referred to in clause (i) of this paragraph (b), then, and in each such case, the Conversion Ratio shall be adjusted to equal the number determined by multiplying (A) the Conversion Ratio immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by (B) a fraction, the numerator of

which shall be the Current Market Price per share of Common Stock on the last Trading Day on which purchasers of Common Stock in regular way trading would be entitled to receive such dividend or distribution and the denominator of which shall be the Current Market Price per share of Common Stock on the first Trading Day on which purchasers of Common Stock in regular way trading would not be entitled to receive such dividend or distribution (the "Ex-dividend Date"); provided that the fraction determined by the foregoing clause (B) shall not be less than 1. An adjustment made pursuant to this clause (ii) shall be effective at the close of business on the Ex-dividend Date. If the Corporation completes a tender offer or otherwise repurchases shares of Common Stock in a single transaction or a related series of transactions, provided such tender offer or offer to repurchase is open to all or substantially all holders of Common Stock (not including open market or other selective repurchase programs), the Conversion Ratio shall be adjusted as though (A) the Corporation had effected a reverse split of the Common Stock to reduce the number of shares of Common Stock outstanding

4 <PAGE>

from (x) the number outstanding immediately prior to the

completion of the tender offer or to the first repurchase for which the adjustment is being made to (y) the number outstanding immediately after the completion of the tender offer or the last repurchase for which the adjustment is being made and (B) the Corporation had paid a dividend on the Common Stock outstanding immediately after completion of the tender offer or of the last repurchase for which the adjustment is being made in an aggregate amount equal to the aggregate consideration paid by the Corporation pursuant to the tender offer or repurchases for which the adjustment is being made. In applying the first two sentences of this Section 7(b)(ii) to the event described in the clause (B) of the preceding sentence, the Current Market Price of the Common Stock on the date of the closing of any such tender offer or on the date of the last repurchase shall be taken as the value of the Common Stock on the Ex-Dividend Date, and the value of the Common Stock on the day preceding the Ex-Dividend Date shall be assumed to be equal to the sum of (x) the value on the Ex-Dividend Date and (y) the per share amount of the dividend described in such clause (B). In the event that any of the consideration paid by the Corporation in any tender offer or repurchase to which this Section 7(b)(ii) applies is in a form other than cash, the value of such consideration shall be determined by an independent investment banking firm of nationally recognized standing to be selected by the Board of

Directors of the Corporation.

(iii) In case at any time the Corporation shall be a party to any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all of the Corporation's assets, liquidation or recapitalization (other than solely a change in the par value of equity securities) of the Common Stock and excluding any transaction to which clause (i) or (ii) of this paragraph (b) applies) in which the previously outstanding Common Stock shall be changed into or exchanged for different securities of the Corporation or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing (each such transaction being herein called the "Transaction," the date of consummation of the Transaction being herein called the "Consummation Date", and the Corporation (in the case of a recapitalization of the Common Stock to which this clause (iii) applies or any other such transaction in which the Corporation retains substantially all of its assets and survives as a corporation) or such other corporation or entity (in each other case) being herein called the "Acquiring Company"), then, as a condition of the consummation of the Transaction, the Corporation shall, as determined in good faith by its Board of Directors based on advice as agreed to

by two investment banking firms of nationally recognized standing, one selected by the Corporation and one selected by USA Networks, Inc. ("USA Networks") (or any successor stockholder of the Corporation holding a majority of the voting power thereof), provide (as evidenced by a resolution of the Board of Directors) for the shares of Series A Convertible Preferred Stock outstanding at the Consummation Date to be exchanged, without any vote of the holders of the Series A Convertible Preferred Stock, for such other common stock

5 <PAGE>

or other securities, or cash or property as equitably reflects the fair market value of a share of Series A Convertible Preferred Stock at such Consummation Date, taking into account all relevant factors, in the absence of the Transaction; provided, however, that if the two investment banking firms referred to in this sentence are unable to agree on such fair market value, then such firms shall select a third investment banking firm of nationally recognized standing which shall then render such advice to the Board of Directors; and provided, further, that in the event that at the time the Corporation becomes a party to a Transaction there is no

shareholder holding a majority of the voting power of the Corporation, the Corporation shall choose a single investment banking firm of national standing to render the advice as to fair market value contemplated by this Section 7(b)(iii).

(iv) Subject to Section 7(b)(iii), at the opening of business on the Conversion Date, the Conversion Ratio shall be adjusted to equal the number determined by multiplying (A) the Conversion Ratio immediately prior to such adjustment by (B) the Final Adjustment Factor.

All calculations under this paragraph (b) shall be made to the nearest one ten-thousandth of a share.

(c) If any adjustment (other than the adjustment provided in paragraph (b)(iv)) in the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock may be converted required pursuant to this Section 7 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the earlier of (i) the time of and together with any subsequent adjustment, which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least 1% of the number of shares of Common

Stock into which each share of Series A Convertible Preferred Stock is then convertible or (ii) the opening of business on the Conversion Date.

(d) The Board of Directors may at its option increase the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock may be converted, in addition to the adjustments required by this Section 7, as shall be determined by it (as evidenced by a resolution of the Board of Directors) to be advisable in order to avoid or diminish any income deemed to be received by any holder for federal income tax purposes of shares of Common Stock or Series A Convertible Preferred Stock resulting from any events or occurrences giving rise to adjustments pursuant to this Section 7 or from any other similar event.

(e) The holder of any shares of Series A Convertible Preferred Stock may exercise his right to receive in respect of such shares the shares of Common Stock or other property or securities, as the case may be, to which such holder has become entitled by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or

6 <PAGE>

certificates representing the shares of Series A Convertible Preferred Stock to be converted accompanied by such other customary documents as are necessary to effect the conversion and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock or other property or securities as the case may be, to which such holder has become entitled to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock or other property or securities as the case may be, to which such holder has become entitled in such name or names. Other than such taxes, the Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock or other property or securities, as the case may be, to which such holder has become entitled on conversion of Series A Convertible Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five business days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Series A Convertible Preferred Stock so converted

shall be entitled or other property or services as the case may be, to which such holder has become entitled.

(f) From and after the Conversion Date or the Redemption Date, a holder of shares of Series A Convertible Preferred Stock shall have no voting or other rights, other than the right to receive upon delivery of the certificate or certificates evidencing shares of Series A Convertible Preferred Stock as provided by paragraph 7(e), the securities or property described in Section 7, if any, or the redemption price as set forth in Section 4, as applicable.

(g) In connection with the conversion of any shares of Series A Convertible Preferred Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price per share of Common Stock on the day on which such shares of Series A Convertible Preferred Stock are deemed to have been converted.

(h) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Series A Convertible Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of Series A Convertible Preferred Stock. The

Corporation shall from time to time, in accordance with the laws of Delaware, increase the authorized amount of Common Stock if at any time the number of authorized shares of Common Stock remaining unissued shall not be sufficient to permit the conversion at such time of all then outstanding shares of Series A Convertible Preferred Stock.

7 <PAGE>

Section 8. Reports as to Adjustments. Whenever the Conversion Ratio is adjusted as provided in Section 7 hereof, the Corporation shall (i) promptly place on file at its principal office and at the office of each transfer agent for the Series A Convertible Preferred Stock, if any, a statement, signed by an officer of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the new Conversion Ratio, and (ii) promptly mail to the holders of record of the outstanding shares of Series A Convertible Preferred Stock at their respective addresses as the same shall appear in the Corporation's stock records a notice stating that the number of shares of Common Stock into which the shares of Series A Convertible Preferred Stock are convertible has been adjusted and setting forth the new Conversion Ratio (or describing the new stock, securities, cash or other property) as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof, and when such adjustment became effective.

Section 9. Definitions. For the purposes of the Certificate of Designations, Preferences and Rights of Series A Convertible Redeemable Preferred Stock which embodies this resolution:

"Conversion Date" shall mean the date that is 5 business days following the earlier of (x) the 39-month anniversary of the Initial Issuance Date and (y) the Consummation Date, in the event of a Transaction contemplated by Section 7(b)(iii) hereof.

"Current Market Price" per share of Common Stock on any date shall be deemed to be the closing price per share of Common Stock for such date. The closing price for each day shall be the last sale price, regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or, admitted to trading on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")

or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors. If the Common Stock is not publicly held or so listed or publicly traded, "Current Market Price" shall mean the Fair Market Value per share as determined in good faith by the Board of Directors of the Corporation.

"Fair Market Value" means the amount which a willing buyer would pay a willing seller in an arm's-length transaction as determined in good faith by the Board of Directors of the Corporation, unless otherwise provided herein.

8 <PAGE>

"Final Adjustment Factor": When the Conversion Date is as specified in clause (x) of the definition of Conversion Date, the Final Adjustment Factor shall equal

0 1

if if

AMP < or = TP1 AMP > or = TP2 otherwise

AMP - TP1 --------TP2 - TP1

where

AMP = Average Market Price: [MP1 + MP2 + MP3] --------------- + --6 2

[MP4]

TP1 = First Target Price: $143.27

TP2 = Second Target Price: $257.88

MP1 = First Measured Price: the daily volume weighted average of the Adjusted Current Market Prices for the Trading Days during the First Measurement Period

MP2 = Second Measured Price: the daily volume weighted average of the Adjusted Current Market Prices for the Trading Days during the Second Measurement Period

MP3 = Third Measured Price: the daily volume weighted average of the Adjusted Current Market Prices for the Trading Days during the Third Measurement Period

MP4 = Fourth Measured Price: the daily volume weighted average of the Adjusted Current Market Prices for the Trading Days during the

Fourth Measurement Period

First Measurement Period: 90 calendar day period following the Initial Issuance Date.

Second Measurement Period: 90 calendar day period ending on the 15-month anniversary of the Initial Issuance Date.

Third Measurement Period: 90 calendar day period ending on the 27-month anniversary of the Initial Issuance Date.

Fourth Measurement Period: 90 calendar day period ending on the 39-month anniversary of the Initial Issuance Date.

Adjusted Current Market Price: as of any date, the product of the Current Market Price on such date times the Conversion Ratio applicable at the close of business on such date.

9 <PAGE>

When the Conversion Date is as specified in clause (y) of the definition of Conversion Date, the Final Adjustment Factor shall be inapplicable and Section 7(b)(iii) shall govern.

"Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.

"Trading Day" means a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

Section 10. Rank. The Series A Convertible Preferred Stock shall rank prior to each other class or series of capital stock (including, without limitation, each class of common stock of the Corporation) of, or other equity interests (including, without limitation, warrants, rights, calls or options exercisable for or convertible into capital stock or equity interests) in, the Corporation.

Section 11. Transfer. To the extent held by USANi LLC, a Delaware limited liability company ("LLC"), USA Networks or any of their respective subsidiaries, or any limited liability companies or limited partnerships controlled by LLC or USA Networks, shares of the Series A Convertible Preferred Stock shall not be transferable or assignable (except by operation of law) and any certificates representing shares of Series A Convertible Preferred Stock held by any such person shall contain a legend to the effect that such securities are nontransferable, nonassignable and

nonnegotiable except by operation of law. Nothing herein shall affect the transferability of any Common Stock into which any shares of the Series A Convertible Preferred is convertible.

IN WITNESS WHEREOF, USA/Lycos Interactive Networks, Inc. has caused this Certificate of Designations, Preferences and Rights of Series A Convertible Redeemable Preferred Stock to be duly executed by its ___________ and attested to by its Secretary this ___ day of ______________, 1999.

USA/LYCOS INTERACTIVE NETWORKS, INC.

By: __________________________________ Name:

ATTEST:

By: _____________________________ Name:

REORGANIZATION AGREEMENT

DATED AS OF [

BY AND BETWEEN

TECHNOLOGY SOLUTIONS COMPANY

AND

eLOYALTY CORPORATION

<PAGE> 2

TABLE OF CONTENTS

PAGE

ARTICLE I - DEFINITIONS AND INTERPRETATION...................................-21.1. Definitions................................................-2-

1.2.

Interpretation.............................................-9-

ARTICLE II - THE DISTRIBUTION...............................................-102.1. 2.2. 2.3. 2.4. Issuance and Delivery of eLoyalty Shares..................-10Distribution of eLoyalty Shares...........................-10TSC Board Action..........................................-11Additional Approvals......................................-11-

ARTICLE III - FORMATION OF ELOYALTY/CORPORATE GOVERNANCE....................-113.1. 3.2. 3.3. 3.4. 3.5. 3.6. 3.7. 3.8. 3.9. Certificate of Incorporation of eLoyalty..................-11By-laws...................................................-11Election of Board of Directors............................-11Appointment of Officers...................................-12Capital Stock of eLoyalty.................................-12Name Reservations and Registrations.......................-12Foreign Qualifications....................................-12Corporate Seal............................................-12Adoption of Stockholders Rights Plan......................-12-

ARTICLE IV - ASSET SEPARATION...............................................-134.1. 4.2. 4.3. 4.4. 4.5. Transfer of Assets........................................-13Assumption of Liabilities.................................-16Retained Assets...........................................-17Retained Liabilities......................................-18Termination of Existing Intercompany Agreements...........-18-

4.6.

Shared Contracts..........................................-18-

ARTICLE V - ASSET SEPARATION CLOSING MATTERS................................-195.1. 5.2. 5.3. Delivery of Instruments of Conveyance.....................-19Delivery of Other Agreements..............................-19Provision of Corporate Records............................-19-

ARTICLE VI - NO REPRESENTATIONS AND WARRANTIES..............................-19-

ARTICLE VII - CERTAIN COVENANTS.............................................-207.1. 7.2. 7.3. 7.4. Third Party Consents......................................-20Material Governmental Approvals and Consents..............-20Non-Assignable Contracts..................................-20Novation of Assumed Liabilities...........................-21-

<PAGE> 3

7.5. 7.6. 7.7. 7.8. 7.9.

Further Assurances........................................-21Nominee Shares............................................-22Collection of Accounts Receivable.........................-23Election of eLoyalty Board of Directors...................-23Late Payments.............................................-23-

7.10. Registration and Listing..................................-237.11. No Noncompetition; Nonhiring; Nonsolicitation.............-247.12. Litigation................................................-247.13. eLoyalty Bank Accounts....................................-257.14. Signs; Use of Company Name................................-257.15. Reasonable Efforts........................................-257.16. Use of Transferred Intellectual Property..................-26-

ARTICLE VIII - CONDITIONS TO THE DISTRIBUTION...............................-268.1. 8.2. 8.3. Approval by TSC Board of Directors........................-26Receipt of IRS Private Letter Tax Ruling..................-26Compliance with State and Foreign Securities and "Blue Sky" Laws.......................................-268.4. 8.5. SEC Filings and Approvals.................................-26Filing and Effectiveness of Registration Statement; No Stop Order.............................................-278.6. 8.7. 8.8. Dissemination of Information to TSC Stockholders..........-27Approval of NASDAQ Listing Application....................-27Receipt of Viability and Fairness Opinion of Financial Advisor.........................................-278.9. Operating Agreements......................................-27-

8.10. Resignations..............................................-278.11. Consents..................................................-278.12. No Actions................................................-288.13. Consummation of Pre-Distribution Transactions.............-28-

8.14. No Other Events...........................................-288.15. Satisfaction of Conditions................................-28-

ARTICLE IX - EMPLOYEES AND EMPLOYEE BENEFIT MATTERS.........................-289.1. 9.2. 9.3. Employment of eLoyalty Employees..........................-28Severance.................................................-28Withdrawal from Participation in TSC Plans and Establishment of eLoyalty Plans.......................-299.4. 9.5. 9.6. 9.7. 9.8. 9.9. Transfer of Savings Plan Account Balances.................-29Welfare Benefits Provided Under eLoyalty Plans............-29Stock Purchase Plans......................................-30Deferred Compensation Plan................................-30Stock Options.............................................-31Workers' Compensation.....................................-32-

9.10. WARN Act..................................................-329.11. Information to be Provided to TSC.........................-32-

ARTICLE X - INSURANCE MATTERS...............................................-32-

<PAGE> 4

10.1. Insurance Prior to the Distribution Date..................-32-

10.2. Ownership of Existing Policies and Programs...............-3310.3. Procurement of Insurance for eLoyalty.....................-3310.4. Acquisition and Maintenance of Post-Distribution eLoyalty Insurance Policies and Programs...........................-3310.5. eLoyalty Directors' and Officers' Insurance...............-3410.6. Post-Distribution Insurance Claims Administration.........-3410.7. Non-Waiver of Rights to Coverage..........................-3510.8. Scope of Affected Policies of Insurance...................-35-

ARTICLE XI - EXPENSES.......................................................-3511.1. Allocation of Expenses....................................-35-

ARTICLE XII - INDEMNIFICATION...............................................-3612.1. Release of Pre-Distribution Claims........................-3612.2. Indemnification by eLoyalty...............................-3812.3. Indemnification by TSC....................................-3912.4. Applicability of and Limitation on Indemnification........-4012.5. Adjustment of Indemnifiable Losses........................-4012.6. Procedures for Indemnification of Third Party Claims......-4112.7. Procedures for Indemnification of Direct Claims...........-4312.8. Contribution..............................................-4412.9. Remedies Cumulative.......................................-4412.10. Survival..................................................-44-

ARTICLE XIII - DISPUTE RESOLUTION...........................................-44-

13.1. Agreement to Arbitrate....................................-4413.2. Escalation and Mediation..................................-4513.3. Procedures for Arbitration................................-4513.4. Selection of Arbitrator...................................-4613.5. Hearings..................................................-4713.6. Discovery and Certain Other Matters.......................-4713.7. Certain Additional Matters................................-4813.8. Continuity of Service and Performance.....................-4913.9. Law Governing Arbitration Procedures......................-4913.10. Choice of Forum............................................-49-

ARTICLE XIV - ACCESS TO INFORMATION AND SERVICES............................-4914.1. Agreement for Exchange of Information.....................-4914.2. Ownership of Information..................................-5014.3. Compensation for Providing Information....................-5014.4. Retention of Records......................................-5014.5. Limitation of Liability...................................-5014.6. Production of Witnesses...................................-5014.7. Confidentiality...........................................-51-

<PAGE> 5

14.8. Privileged Matters........................................-51-

ARTICLE XV - MISCELLANEOUS..................................................-5215.1. Entire Agreement..........................................-5215.2. Choice of Law and Forum...................................-5315.3. Amendment.................................................-5315.4. Waiver....................................................-5315.5. Partial Invalidity........................................-5315.6. Execution in Counterparts.................................-5315.7. Successors and Assigns....................................-5315.8. Third Party Beneficiaries.................................-5415.9. Notices...................................................-5415.10. Performance...............................................-5515.11. Force Majeure.............................................-5515.12. No Public Announcement....................................-5515.13. Termination...............................................-55-

<PAGE> 6

EXHIBITS

Exhibit A - eLoyalty Business Exhibit B1 - Form of TSC Intellectual Property License Agreement Exhibit B2 - Form of eLoyalty Intellectual Property License Agreement Exhibit C - Form of Shared Services Agreement Exhibit D - Form of Tax Sharing and Disaffiliation Agreement Exhibit E - Stockholder Rights Plan Exhibit F - Balance Sheet Assets Exhibit G - eLoyalty Board of Directors Exhibit H - List of Mediators

SCHEDULES

Schedule 4.1(d) - Real Estate Leases Schedule 4.1(e) - Personal Property Leases Schedule 4.1(f) - Intellectual Property Schedule 4.1(g)(i) - Contracts Related to Acquisitions or Divestitures Schedule 4.1(g)(ii) - Service, License, Maintenance and Support Contracts Schedule 4.1(g)(iii) - Supplier Contracts Schedule 4.1(g)(iv) - Joint Development and Alliance Contracts Schedule 4.1(g)(v) - Third-Party Service Contracts Schedule 4.1(g)(vi) - Telecommunications Contracts Schedule 4.1(j) - Subsidiaries, Joint Ventures and Minority Interests Schedule 4.1(m) - Trademarks Schedule 4.1(n) - Loans to Transferred Employees

Schedule 4.1(o) - Industry Awards Schedule 4.5 - Surviving Intercompany Agreements Schedule 7.13 - eLoyalty Bank Accounts Schedule 9.1 - Transferred Employees

<PAGE> 7

REORGANIZATION AGREEMENT

REORGANIZATION AGREEMENT, dated as of [________], 2000, by and between Technology Solutions Company, a Delaware corporation ("TSC"), and eLoyalty Corporation, a Delaware corporation ("eLoyalty") and, as of the date hereof, a wholly-owned Subsidiary (as hereinafter defined) of TSC.

WHEREAS, TSC provides, inter alia, information technology consulting and strategic business consulting services that help clients improve operations, transform customer relationships and build and enhance customer loyalty (as more fully described in Exhibit A hereto, the "eLoyalty Business");

WHEREAS, the Board of Directors of TSC has determined that it would be advisable and in the best interests of TSC and its stockholders for TSC

to transfer to eLoyalty the business, operations, assets and liabilities related to the eLoyalty Business;

WHEREAS, TSC has agreed to transfer and assign, or cause to be transferred and assigned, to eLoyalty substantially all of the assets and properties of the eLoyalty Business held by TSC and/or one or more of its Subsidiaries, and eLoyalty has agreed to assume, or cause to be assumed by one or more of its Subsidiaries, certain liabilities and obligations arising out of or relating to the eLoyalty Business (collectively, the "Contribution");

WHEREAS, the Board of Directors of TSC has determined that it would be advisable and in the best interests of TSC and its stockholders for TSC to distribute on a pro-rata basis to the holders of record of TSC common stock, par value $.01 per share (the "TSC Common Stock"), without any consideration being paid by such holders, all of the outstanding shares of eLoyalty common stock, par value $.01 per share (the "eLoyalty Common Stock") owned directly and indirectly by TSC (the "Distribution");

WHEREAS, for federal income tax purposes, the Contribution and Distribution are intended to qualify for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"); and

WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Contribution and

Distribution and certain other agreements that will govern the relationship of TSC and eLoyalty following the Distribution;

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, TSC and eLoyalty agree as follows:

<PAGE> 8

ARTICLE I

DEFINITIONS AND INTERPRETATION

1.1.

DEFINITIONS. In this Agreement, the following terms

have the meanings specified or referred to in this Section 1.1:

"ACTION" means any action, claim, suit, arbitration, inquiry,

subpoena, discovery request, proceeding or investigation by or before any court or grand jury, any governmental or other regulatory or administrative entity, agency or commission or any arbitration tribunal.

"AFFILIATE" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. For the purpose of this definition, the term "control" means the power to direct the management of an entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the term "controlled" has the meaning correlative to the foregoing. After the Distribution Date, eLoyalty and TSC shall not be deemed to be under common control for purposes hereof due solely to the fact that eLoyalty and TSC have common stockholders.

"APPLICABLE DEADLINE" has the meaning specified in Section 13.3(b).

"ARBITRATION ACT" means the United States Arbitration Act, 9 U.S.C. ss.ss.1-16, as the same may be amended from time to time.

"ARBITRATION DEMAND DATE" has the meaning specified in Section 13.3(a).

"ARBITRATION DEMAND NOTICE" has the meaning specified in Section 13.3(a).

"ASSET TRANSFER DATE" means the date determined by the Board of Directors of TSC as the date on which the Transferred Assets are transferred to eLoyalty.

"ASSUMED ACTIONS" has the meaning specified in Section 7.12(a).

"ASSUMED LIABILITIES" has the meaning specified in Section 4.2.

"BALANCE SHEET" has the meaning specified in Section 4.1(a).

"BOARD OF DIRECTORS" means the board of directors of the referenced corporation or any duly authorized committee thereof.

"CODE" has the meaning specified in the sixth paragraph of this Agreement.

"COMBINED VALUE" has the meaning specified in Section 9.8(a).

"CONTRACTS" has the meaning specified in Section 4.1(g).

<PAGE> 9

"CONTRIBUTION" has the meaning specified in the fourth paragraph of this Agreement.

"CONVEYANCING INSTRUMENTS" has the meaning specified in Section 5.1.

"COPYRIGHTS" means United States and foreign copyrights, both registered and unregistered, along with the registrations and applications to register any such copyrights.

"DISTRIBUTION" has the meaning specified in the fifth paragraph of this Agreement.

"DISTRIBUTION DATE" means the date determined by the Board of Directors of TSC as the date on which the eLoyalty Shares are distributable to holders of record of TSC Common Stock as of the Record Date.

"ELOYALTY" has the meaning specified in the first paragraph of this Agreement.

"ELOYALTY BUSINESS" has the meaning specified in the second paragraph of this Agreement.

"ELOYALTY COMMON STOCK" has the meaning specified in the fifth paragraph of this Agreement.

"ELOYALTY DEFERRED COMPENSATION PLAN" has the meaning specified in Section 9.3(b).

"ELOYALTY DISTRIBUTABLE SHARE" means one (1) eLoyalty Share.

"ELOYALTY INDEMNIFIED PARTIES" has the meaning specified in Section 12.3.

"ELOYALTY SAVINGS PLAN" has the meaning specified in Section 9.3(b).

"ELOYALTY SHARE" means one share of eLoyalty Common Stock.

"ELOYALTY VALUE" has the meaning specified in Section 9.8(a).

"ESCALATION NOTICE" has the meaning specified in Section 13.2(a).

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder).

"EXPENSES" means any and all expenses incurred in connection

with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals).

<PAGE> 10

"FOREIGN EXCHANGE RATE" means, with respect to any currency other than United States dollars, as of any date of determination, the average of the opening bid and asked rates on such date at which such currency may be exchanged for United States dollars as quoted by Bank of America, N.A.

"GOVERNMENTAL AUTHORITY" means any foreign, federal, state, local or other government, governmental, statutory or administrative authority, regulatory body or commission or any court, tribunal or judicial or arbitral body.

"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations promulgated thereunder.

"INDEMNIFIED PARTY" has the meaning specified in Section 12.5(a).

"INDEMNIFYING PARTY" has the meaning specified in Section 12.5(a).

"INDEMNITY PAYMENT" has the meaning specified in Section 12.5(a).

"INFORMATION" has the meaning specified in Section 14.1(a).

"INFORMATION STATEMENT" has the meaning specified in Section 7.10(a).

"INSURANCE AMOUNT" has the meaning specified in Section 10.5.

"INSURANCE CHARGES" has the meaning specified in Section 10.6.

"INSURANCE POLICIES" means the insurance policies written by insurance carriers unaffiliated with TSC pursuant to which eLoyalty or one or more of its Subsidiaries (or their respective officers or directors) will be insured parties after the Distribution Date.

"INSURANCE PROCEEDS" means those monies (i) received by an insured from an insurance carrier, (ii) paid by an insurance carrier on behalf of the insured or (iii) received from any third Person in the nature of insurance, contribution or indemnification in respect of any Liability, in each such case net of any applicable premium adjustments (including reserves and

retrospectively-rated premium adjustments) and net of any costs or expenses (including allocated costs of in-house counsel and other personnel) incurred in the collection thereof.

"INSURED CLAIMS" means those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the TSC Policies, whether or not subject to deductibles, co-insurance, uncollectability, premium adjustments (including reserves), retrospectively-rated premium adjustments or retentions, but only to the extent that such Liabilities are within applicable TSC Policy limits, including aggregates and deductibles.

"INTELLECTUAL PROPERTY LICENSE AGREEMENTS" means the TSC and eLoyalty intellectual property license

<PAGE> 11

agreements in substantially the forms of Exhibits B-1 and B-2 hereto.

"INTERCOMPANY AGREEMENTS" means any Contract between TSC and

eLoyalty entered into prior to the Distribution Date.

"INTERFACES" means software that creates interfaces between the Software and third-party software programs.

"INVESTORS" has the meaning specified in Section 3.3.

"IRS" means the Internal Revenue Service.

"LIABILITY" means any and all debts, liabilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising (unless otherwise specified in this Agreement), including all costs and expenses relating thereto, and including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any Governmental Authority or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking.

"LOSSES" means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, fees, expenses, deficiencies, claims or other charges, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown (including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and

compromises relating thereto and attorneys' fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions).

"MATERIAL GOVERNMENTAL APPROVALS AND CONSENTS" means any material notices, reports or other filings to be made with or to, or any consents, registrations, approvals, permits, clearances or authorizations to be obtained from, any Governmental Authority.

"METHODOLOGIES" means methodologies, architectures, processes, algorithms and technologies, including, without limitation, all related trade secrets and know-how.

"NASDAQ" means The NASDAQ Stock Market's National Market System or any successor thereto.

"NON-PERMITTED NAMES" has the meaning specified in Section 7.14.

"OPERATING AGREEMENTS" means the Intellectual Property License Agreements, the Tax Sharing Agreement, the Shared Services Agreement and any other agreement regarding the ongoing business and service relationships between TSC and eLoyalty and their respective Subsidiaries and Affiliates following the Distribution.

<PAGE> 12

"PARTY" means TSC or eLoyalty.

"PATENTS" means United States and foreign patents and applications for patents, including any continuations, continuations-in-part, divisions, renewals, reissues and extensions thereof.

"PERSON" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or Governmental Authority.

"PERSONAL PROPERTY LEASES" has the meaning specified in Section 4.1(e).

"PRIME RATE" means the rate that Bank of America, N.A. (or any successor thereto or other major money center commercial bank agreed to by the Parties) announces from time to time as its prime lending rate, as in effect from time to time.

"PRIVILEGE" OR "PRIVILEGES" has the meaning specified in

Section 14.8(a).

"PRIVILEGED INFORMATION" has the meaning specified in Section 14.8(a).

"PURCHASE AGREEMENT" has the meaning specified in Section 3.3.

"REAL ESTATE LEASES" has the meaning specified in Section 4.1(d).

"RECEIVABLES" has the meaning specified in Section 4.1(b)(i).

"RECORD DATE" means the date determined by the Board of Directors of TSC as the record date for determining stockholders of TSC entitled to receive shares of eLoyalty Common Stock in the Distribution.

"REGISTRATION STATEMENT" has the meaning specified in Section 7.10(a).

"RETAINED ASSETS" has the meaning specified in Section 4.3.

"RETAINED BUSINESS" means those portions of the business of TSC and its current Subsidiaries that are not part of the eLoyalty Business.

"RETAINED LIABILITIES" has the meaning specified in Section

4.4.

"RIGHTS PLAN" has the meaning specified in Section 3.9.

"SEC" means the United States Securities and Exchange Commission.

"SECURITIES ACT" means the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder).

<PAGE> 13

"SECURITY INTEREST" means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer or other encumbrance of any nature whatsoever.

"SHARED CONTRACT" means a Contract with a third Person that directly benefits both TSC and eLoyalty.

"SHARED CONTRACTUAL LIABILITIES" mean Liabilities in respect of Shared Contracts.

"SHARED SERVICES AGREEMENT" means the shared services agreement in substantially the form of Exhibit H hereto.

"SOFTWARE" means computer software programs, in source code and object code form, including, without limitation, all related source diagrams, flow charts, specifications, documentation and all other materials and documentation necessary to allow a reasonably skilled third party programmer or technician to maintain, support or enhance the Software.

"SUBSIDIARY" means, when used with reference to any Person, any corporation or other organization whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided, however, that no Person that is not directly or indirectly wholly-owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power or ability to control, that Person.

"TAX" (and, with correlative meaning, "Taxes" and "Taxable") means:

(i) any federal, state, local or foreign net income, gross income, gross receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value-added, transfer, stamp, or environmental tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any Governmental Authority; and

(ii) any Liability of either Party for the payment of amounts with respect to payments of a type described in clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group, or as a result of any obligation of either Party under any Tax sharing arrangement or Tax indemnity arrangement.

"TAX SHARING AGREEMENT" means the Tax Sharing and Disaffiliation Agreement in substantially the form of Exhibit B hereto.

<PAGE> 14

"THIRD PARTY CLAIM" has the meaning specified in Section

12.6(a).

"THIRD PARTY CONSENTS" has the meaning specified in Section 7.1.

"TRADEMARKS" has the meaning specified in Section 4.1(m).

"TRANSFER AGENT" means ChaseMellon Shareholder Services, L.L.C., the transfer agent appointed by TSC to distribute shares of eLoyalty Common Stock pursuant to the Distribution.

"TRANSFERRED ACTIONS" has the meaning specified in Section 7.12(b).

"TRANSFERRED ASSETS" has the meaning specified in Section 4.1.

"TRANSFERRED EMPLOYEES" has the meaning specified in Section 9.1.

"TRANSFERRED INTELLECTUAL PROPERTY" has the meaning specified in Section 4.1(f).

"TSC" has the meaning specified in the first paragraph of this Agreement.

"TSC COMMON STOCK" has the meaning specified in the fifth paragraph of this Agreement.

"TSC DEFERRED COMPENSATION PLAN" has the meaning specified in Section 9.7.

"TSC INDEMNIFIED PARTIES" has the meaning specified in Section 12.2(a).

"TSC PLANS" has the meaning specified in Section 9.3(a).

"TSC POLICY" and "TSC POLICIES" have the meanings specified in Section 10.2.

"TSC SAVINGS PLAN" has the meaning specified in Section 9.4.

"TSC VALUE" has the meaning specified in Section 9.8(b).

"VOTING STOCK" means all of the capital stock of eLoyalty entitled to vote generally in the election of directors but excluding any class or series of capital stock entitled to vote only in the event of dividend arrearages thereon, whether or not at the time of determination there are any such dividend arrearages.

"WARN ACT" has the meaning specified in Section 9.10.

1.2. INTERPRETATION. (a) In this Agreement, unless the context clearly indicates otherwise:

<PAGE> 15

(i) words used in the singular include the plural and words in the plural include the singular;

(ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement;

(iii) reference to any gender includes the other gender;

(iv) the word "including" means "including but not limited

to";

(v) reference to any Article, Section, Exhibit or Schedule means such Article or Section of, or such Exhibit or Schedule to, this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;

(vi) the words "herein," "hereunder," "hereof," "hereto" and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof;

(vii) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;

(viii) reference to any law (including statutes and ordinances) means such law (including all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(ix) relative to the determination of any period of time, "from" means "from and including," "to" means "to but excluding" and

"through" means "through and including";

(x) accounting terms used herein shall have the meanings historically ascribed to them by TSC and its Subsidiaries based upon TSC's internal financial policies and procedures in effect prior to the date of this Agreement;

(xi) in the event of any conflict between the provisions of the body of this Agreement and the Exhibits or Schedules hereto, the provisions of the body of this Agreement shall control; and

(xii) the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement.

(b) This Agreement was negotiated by the Parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against either Party shall not apply to any construction or

<PAGE> 16

interpretation hereof.

ARTICLE II

THE DISTRIBUTION

2.1. ISSUANCE AND DELIVERY OF ELOYALTY SHARES. eLoyalty shall issue to TSC the number of eLoyalty Shares required so that the total number of eLoyalty Shares held by TSC on the Distribution Date is equal to the total number of eLoyalty Shares distributable pursuant to Section 2.2. TSC shall deliver to the Transfer Agent one or more stock certificates representing all of the eLoyalty Shares held by TSC, together with one or more stock power(s) duly endorsed in blank. The Transfer Agent will then transfer and distribute such shares in the manner described in Section 2.2 below.

2.2. DISTRIBUTION OF ELOYALTY SHARES. eLoyalty shall provide to the Transfer Agent sufficient certificates in such denominations as the Transfer Agent may request in order to effect the Distribution. TSC shall instruct the Transfer Agent (i) to distribute to all holders of record of TSC Common Stock as of the Record Date the eLoyalty Distributable Share for each share of TSC Common Stock outstanding and held of record by such holder as of the Record Date, and (ii) to deliver to eLoyalty, as a contribution to eLoyalty, all of the remaining eLoyalty Shares, if any, then held by the Transfer Agent. Any such returned eLoyalty Shares shall be canceled immediately by eLoyalty, and

the Board of Directors of eLoyalty shall take appropriate action so that such returned shares shall not constitute treasury shares. All of the distributed eLoyalty Shares shall be validly issued, fully paid and nonassessable and shall be free of any preemptive rights.

2.3. TSC BOARD ACTION. The Board of Directors of TSC shall, in its sole discretion, determine the Record Date and the Distribution Date and all appropriate procedures in connection with the Distribution. The Board of Directors of TSC also shall have the right to adjust at any time prior to the Distribution Date the eLoyalty Distributable Share. The consummation of the transactions provided for in this Article II shall be effected only after the Distribution has been declared by the Board of Directors of TSC and after all of the conditions set forth in Article VIII hereof shall have been satisfied or waived by TSC.

2.4. ADDITIONAL APPROVALS. TSC shall cooperate with eLoyalty in effecting, and if so requested by eLoyalty, TSC shall, as the majority stockholder of eLoyalty prior to the Distribution, ratify all actions that are reasonably necessary or desirable to be taken by eLoyalty to effectuate, the transactions referenced in or contemplated by this Agreement in a manner consistent with the terms of this Agreement.

ARTICLE III

FORMATION OF ELOYALTY/CORPORATE GOVERNANCE

<PAGE> 17 3.1. CERTIFICATE OF INCORPORATION OF ELOYALTY. The original Certificate of Incorporation of eLoyalty was filed with the Secretary of State of the State of Delaware on May 11, 1999. On July 9, 1999, an amendment to the Certificate of Incorporation was filed that (i) changed the name of the company from TSC/ECM Inc. to eLoyalty Corporation and (ii) increased the number of authorized shares of capital stock to 110,000,000, consisting of 10,000,000 shares of eLoyalty preferred stock, par value $.01 per share, and 100,000,000 shares of eLoyalty Common Stock. On January 3, 2000 an additional amendment to the Certificate of Incorporation was filed whereby eLoyalty elected to be governed by Section 203 of the General Corporation Law of the State of Delaware.

3.2. BY-LAWS. The original By-laws of eLoyalty were adopted on June 21, 1999 by written action of the sole incorporator of eLoyalty.

3.3. ELECTION OF BOARD OF DIRECTORS. The initial Board of Directors of eLoyalty, consisting of Messrs. Conway, Kohler and Waltrip, was elected on June 22, 1999 by written action of TSC in its capacity as the sole stockholder of eLoyalty. On June 25, 1999 the Board of Directors of eLoyalty, by written action, increased the size of the Board from three to six and elected Messrs. Murray, Purcell and Zucchini as additional directors. On August 13, 1999

TSC and eLoyalty entered into a Common Stock Purchase and Sale Agreement (the "Purchase Agreement") that, among other things, grants each of Sutter Hill Ventures and Technology Crossover Management III, L.L.C. (together, the "Investors") the right to designate a nominee to the Board of Directors of eLoyalty. The Investors' nominees are Messrs. Coxe and Hoag. On January 3, 2000 the Board of Directors of eLoyalty, by written action, accepted the resignations of Messrs. Waltrip and Kohler from the Board and reduced the size of the Board from six to five. Messrs. Kohler and Purcell were elected as additional directors on January 3, 2000 by written action of TSC in its capacity as the sole stockholder of eLoyalty. Messrs. Waltrip will resign from the Board of Directors of eLoyalty on or prior to the Distribution Date.

3.4. APPOINTMENT OF OFFICERS. On June 22, 1999 the Board of Directors of eLoyalty, by written action, appointed Kelly D. Conway as the President and Chief Executive Officer, Paul R. Peterson as the Secretary and Timothy P. Dimond as the Treasurer of eLoyalty. On December 16, 1999, the Board of Directors of eLoyalty, by written action, appointed Timothy J. Cunningham as the Assistant Treasurer and Chief Financial Officer. On January 3, 2000, Messrs. Peterson and Dimond resigned from their respective positions as officers of eLoyalty and the Board of Directors of eLoyalty, by written action, appointed John R. Purcell as the Iterim Chairman, Kelly D. Conway as the President and Chief Executive Officer and Timothy J. Cunningham as the Chief Financial Officer, Secretary and Treasurer.

3.5. CAPITAL STOCK OF ELOYALTY. On June 22, 1999 the Board of

Directors of eLoyalty, by written action, approved the issuance and delivery to TSC of a stock certificate evidencing TSC's ownership of 100 shares of eLoyalty Common Stock. On December 16, 1999 the Board of Directors of eLoyalty issued 41,399,900 additional shares of eLoyalty Common Stock to TSC in exchange for a cash payment of $413,999. The Purchase Agreement provides, among other things, for the sale of 1,200,000 shares of eLoyalty Common Stock to Sutter Hill Ventures and an aggregate of 1,200,000 shares of eLoyalty Common Stock to four entities controlled by Technology Crossover Management III, L.L.C. The number of shares of eLoyalty Common Stock actually sold to those investors is subject to adjustment. As of December 31, 1999, options to acquire 5,340,000 shares of eLoyalty Common Stock have been issued under eLoyalty's 1999 Stock Incentive Plan.

<PAGE> 18

3.6. NAME RESERVATIONS AND REGISTRATIONS. eLoyalty has reserved the name "eLoyalty Corporation" in all states except for Florida, which does not allow such a reservation. eLoyalty has registered the name "eLoyalty Corporation" in South Dakota and New Mexico.

3.7. FOREIGN QUALIFICATIONS. eLoyalty has qualified or will qualify in all jurisdictions (other than its place of incorporation) in which it intends to conduct business.

3.8. CORPORATE SEAL. On June 22, 1999 the Board of Directors of eLoyalty,

by written action, approved the form of the corporate seal. Inscribed thereon is the name "eLoyalty Corporation" and the words "Corporate Seal, Delaware."

3.9. ADOPTION OF STOCKHOLDERS RIGHTS PLAN. On December 16, 1999 the Board of Directors of eLoyalty met to discuss, among other things, the desirability of adopting a stockholder rights plan. In connection with that meeting, a presentation was made to the Board of Directors of eLoyalty to assist them with their analysis of the merits of taking such action. On January , 2000 the Board of Directors of eLoyalty, by written action, will consider the adoption of the Stockholders Rights Plan (the "Rights Plan") in substantially the form attached as Exhibit C hereto, and the establishment of a committee of the Board of Directors of eLoyalty to set the strike price under the Rights Plan.

ARTICLE IV

ASSET SEPARATION

4.1. TRANSFER OF ASSETS. Subject to the terms and conditions of this Agreement, on or prior to the Distribution Date, TSC shall convey, assign, transfer, contribute and set over, or cause to be conveyed, assigned, transferred, contributed and set over, to eLoyalty, and eLoyalty shall accept and receive, all right, title and interest of TSC in and to the tangible and intangible assets of the eLoyalty Business (all of such assets being hereinafter referred to as the "Transferred Assets"), including the following:

(a) Balance Sheet Assets. All assets reflected or disclosed on the unaudited balance sheet of the eLoyalty Business as of September 30, 1999 attached as Exhibit D hereto (the "Balance Sheet"), including all machinery, equipment, furniture and other tangible personal property, whether owned or leased, used primarily in the operation of the eLoyalty Business, subject to acquisitions, dispositions and adjustments in the ordinary course of the eLoyalty Business, consistent with past practice, after such date;

(b) Receivables.

(i) All accounts receivable, notes receivable, lease receivables, prepayments (other than prepaid insurance), advances and other receivables arising out of or produced by the eLoyalty Business and owing by any Persons (the "Receivables");

<PAGE> 19

(ii) all cash payments received after the Distribution Date on account of the Receivables;

(iii) all manufacturers' warranties or guarantees related to the Transferred Assets or related to any of the Assumed

Liabilities; and

(iv) any and all manufacturers' or third party service or replacement programs relating to the Transferred Assets;

(c) Inventories. All supplies, packaging and other inventories related to the eLoyalty Business.

(d) Real Property Leases. Those certain real estate leases set forth on Schedule 4.1(d) hereto (the "Real Estate Leases") and any and all improvements, fixtures, machinery, equipment and other property located on the premises demised under such Real Estate Leases;

(e) Personal Property Leases. Those certain machinery, equipment or other tangible personal property leases (the "Personal Property Leases") set forth on Schedule 4.1(e) hereto;

(f) Intellectual Property. All Copyrights, Interfaces, Methodologies, Patents and Software to the extent the foregoing are used primarily in connection with the eLoyalty Business, including (i) those set forth on Schedule 4.1(f) hereto; (ii) all business and technical information, nonpatented inventions, discoveries, processes, formulations, trade secrets, know-how and technical data used primarily in connection with the eLoyalty Business made or conceived by employees, consultants or contractors of TSC or its Subsidiaries as to which TSC or its Subsidiaries

have rights under any agreement or otherwise relating to the foregoing; (iii) all business and technical information, nonpatented inventions, discoveries, processes, formulations, trade secrets, know-how and technical data used primarily in connection with the eLoyalty Business made or conceived by third parties as to which TSC or its Subsidiaries have rights pursuant to executory agreements with said third parties relating to the foregoing; and (iv) all permits, grants, contracts, agreements and licenses running to or from TSC or its Subsidiaries relating to the foregoing; and all rights that are associated with the foregoing (collectively, the "Transferred Intellectual Property");

(g) Contracts. All of the following contracts, agreements, arrangements, leases (other than Real Estate Leases and Personal Property Leases), manufacturers' warranties, memoranda, understandings and offers open for acceptance of any nature, whether written or oral (the "Contracts"):

(i) all Contracts related to acquisitions or divestitures of assets or stock related primarily to the eLoyalty Business, including Contracts related to the transactions set forth on Schedule 4.1(g)(i) hereto, except to the extent any such <PAGE> 20 Contracts relate to the Retained Business and except to the extent indicated on Schedule 4.1(g)(i);

(ii) all service, license, maintenance and support Contracts with customers related primarily to the eLoyalty Business, including those set forth on Schedule 4.1(g)(ii) hereto;

(iii) all supplier Contracts related primarily to the eLoyalty Business relating either to raw materials or distributed products, including those set forth on Schedule 4.1(g)(iii) hereto;

(iv) all joint development and alliance Contracts related primarily to the eLoyalty Business, including those set forth on Schedule 4.1(g)(iv) hereto;

(v) all Contracts with third-parties related primarily to the eLoyalty Business relating to services provided to, or for the benefit of, eLoyalty, including those set forth on Schedule 4.1(g)(v) hereto;

(vi) the telecommunications Contracts related primarily to the eLoyalty Business, including those set forth on Schedule 4.1(g)(vi) hereto;

(vii) the Shared Contracts that are designated as being assigned to eLoyalty; and

(viii) all other Contracts related primarily to the eLoyalty Business.

(h) Permits and Licenses. All permits, approvals, licenses, franchises, authorizations or other rights granted by any Governmental Authority held or applied for by TSC and its Subsidiaries and that are used primarily in the eLoyalty Business or that relate primarily to the Transferred Assets, and all other consents, grants and other rights that are used primarily for the lawful ownership of the Transferred Assets or the operation of the eLoyalty Business and that are legally transferable to eLoyalty;

(i) Claims and Indemnities. All rights, claims, demands, causes of action, judgments, decrees and rights to indemnity or contribution, whether absolute or contingent, contractual or otherwise, in favor of TSC relating primarily to the eLoyalty Business, including the right to sue, recover and retain such recoveries and the right to continue in the name of TSC and its Subsidiaries any pending actions relating to the foregoing, and to recover and retain any damages therefrom;

(j) Subsidiaries, Joint Ventures and Minority Interests. All shares of capital stock or equity or debt or other interests owned by TSC or its Subsidiaries in the Subsidiaries, joint ventures and minority investments set forth on Schedule 4.1(j) hereto;

(k) Books And Records. All books and records (including all records <PAGE> 21

pertaining to customers, suppliers and personnel), wherever located, that relate primarily to the operation of the eLoyalty Business;

(l) Supplies. All office supplies, production supplies, spare parts, purchase orders, forms, labels, shipping material, art work, catalogues, sales brochures, operating manuals and advertising and promotional material and all other printed or written material that relate primarily to the operation of the eLoyalty Business;

(m) Trademarks. All United States, state and foreign trademarks, service marks, logos, trade dress and trade names (including all assumed or fictitious names under which TSC is conducting the eLoyalty Business), whether registered or unregistered, including all goodwill associated with the foregoing, and all registrations and pending applications to register the foregoing to the extent the foregoing are used or intended to be used primarily in connection with the eLoyalty Business, including those set forth on Schedule 4.1(m) hereto (collectively, the "Trademarks");

(n) Loans to Transferred Employees. All loans, notes or other debts owed to TSC and its Subsidiaries by any Transferred Employees (as hereinafter defined), including those set forth on Schedule 4.1(n) hereto;

(o) Industry Awards. All industry awards that are sponsored primarily by the eLoyalty Business, including those set forth on Schedule 4.1(o) hereto;

(p) Tax Credits. Any right, title or interest in any tax refund, credit or benefit to which eLoyalty or any of its Subsidiaries is entitled in accordance with the terms of the Tax Sharing Agreement; and

(q) Other Assets. All other assets, tangible or intangible, including all goodwill, that are used primarily in or relate primarily to the operations of the eLoyalty Business, including, without limitation, e-mail addresses, domain names and websites.

4.2. ASSUMPTION OF LIABILITIES. Except as expressly limited in this Article IV, eLoyalty shall assume, effective on or before the Distribution Date, and pay, comply with and discharge all contractual and other Liabilities of TSC arising out of or relating to the eLoyalty Business, whether due or to become due, including:

(a) All Liabilities of TSC that are reflected, disclosed or reserved for on the Balance Sheet, as such Liabilities may be increased or decreased in the operation of the eLoyalty Business from the date of the Balance Sheet through the Distribution Date in the ordinary course of business consistent with past practice;

(b) All Liabilities of TSC under or related to the Real Estate Leases, the Personal Property Leases and the Contracts, such assumption to occur as (i) assignee if such Real Estate Leases, Personal Property Leases and

Contracts are assignable and are assigned or otherwise transferred to eLoyalty, or (ii) subcontractor, sublessee or sublicensee as

<PAGE> 22

provided in Section 7.3 below if assignment of such Real Estate Leases, Personal Property Leases and Contracts and/or the proceeds thereof is prohibited by law, by the terms thereof or not permitted by the other contracting party;

(c) All warranty, performance and similar obligations entered into or made by TSC prior to the Distribution Date with respect to the products or services of the eLoyalty Business;

(d) All Liabilities of TSC in connection with claims of past or current employees of the eLoyalty Business, except as otherwise expressly provided in this Agreement;

(e) All Liabilities of TSC related to any and all Actions asserting a violation of any law, rule or regulation related to or arising out of the operations of the eLoyalty Business, whether before or after the Distribution Date and the Liabilities relating to any Assumed Actions (as hereinafter defined);

(f) All Liabilities for which eLoyalty is liable in accordance with

the terms of the Tax Sharing Agreement;

(g) All Liabilities of TSC related to the immigrant and nonimmigrant status of any foreign national employees who are Transferred Employees (as hereinafter defined); and

(h) All other Liabilities of TSC relating to the eLoyalty Business, whether existing on the date hereof or arising at any time or from time to time after the date hereof, and whether based on circumstances, events or actions arising heretofore or hereafter, whether or not such Liabilities shall have been disclosed herein, and whether or not reflected on the books and records of TSC or eLoyalty or the Balance Sheet.

The Liabilities described in this Section 4.2 are referred to in this Agreement collectively as the "Assumed Liabilities."

4.3. RETAINED ASSETS. Notwithstanding anything to the contrary herein, the following assets (the "Retained Assets") are not, and shall not be deemed to be, Transferred Assets:

(a) Cash and cash equivalents, any cash on hand or in bank accounts, certificates of deposit, commercial paper and similar securities, except for (i) deposits securing bonds, letters of credit, leases and all other obligations related to the eLoyalty Business, (ii) petty cash and impressed funds related to the eLoyalty Business, (iii) cash held in foreign bank

accounts and (iv) $20,000,000;

(b) Any right, title or interest in any tax refund, credit or benefit to which TSC or any of its Subsidiaries is entitled in accordance with the terms of the Tax Sharing Agreement.

(c) Any amounts accrued on the books and records of TSC and its Subsidiaries or

<PAGE> 23

the eLoyalty Business with respect to any Retained Liabilities (as hereinafter defined);

(d) Except as provided in Sections 9.4 and 9.7, assets relating to the provision of benefits to present or former employees of the eLoyalty Business; and

(e) Any intellectual property rights in and to the name "TSC" and the related emblem design, and any variants thereof, and the trademarks and trade names used by TSC or its Subsidiaries in relation to the Retained Business, except as provided in the Intellectual Property License Agreements attached as Exhibits B-1 and B-2 hereto.

4.4. RETAINED LIABILITIES. Notwithstanding anything to the contrary in this

Agreement, neither eLoyalty nor any of its Subsidiaries shall assume any of the following Liabilities of TSC or its Subsidiaries (the "Retained Liabilities"):

(a) Except as provided in Article IX, the Liabilities under all the TSC Plans; and

(b) All Liabilities for which TSC is liable in accordance with the terms of the Tax Sharing Agreement.

4.5. TERMINATION OF EXISTING INTERCOMPANY AGREEMENTS. Except as otherwise expressly provided in this Agreement, the Operating Agreements or the agreements set forth on Schedule 4.5, all Intercompany Agreements and all other intercompany arrangements and course of dealings, whether or not in writing and whether or not binding, in effect immediately prior to the Distribution Date, shall be terminated and be of no further force and effect from and after the Distribution Date.

4.6. SHARED CONTRACTS. (a) With respect to Shared Contractual Liabilities pursuant to, arising under or relating to any Shared Contract, such Shared Contractual Liabilities shall be allocated between TSC and eLoyalty as follows:

(i) First, if a Liability is incurred exclusively in respect of a benefit received by one Party, the Party receiving such benefit shall be responsible for such Liability;

(ii) Second, if a Liability cannot be so allocated under clause (i), such Liability shall be allocated between the Parties based on the relative proportions of total benefit received (over the term of the Shared Contract, measured as of the date of the allocation) under the relevant Shared Contract. Notwithstanding the foregoing, each Party shall be responsible for any and all Liabilities arising out of or resulting from its breach of the relevant Shared Contract.

(b) If either TSC or eLoyalty improperly receives any benefit or payment under any Shared Contract that was intended for the other Party, the Party receiving such benefit or payment will use commercially reasonable efforts to deliver, transfer or otherwise afford such benefit or payment (on an after-tax basis) to the other Party.

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ARTICLE V

ASSET SEPARATION CLOSING MATTERS

5.1. DELIVERY OF INSTRUMENTS OF CONVEYANCE. In order to effectuate the transactions contemplated by Article IV, the Parties shall execute and deliver, or cause to be executed and delivered, prior to or as of

the Distribution Date such deeds, bills of sale, instruments of assumption, instruments of assignment, stock powers, certificates of title and other instruments of assignment, transfer, assumption and conveyance (collectively, the "Conveyancing Instruments") as the Parties shall reasonably deem necessary or appropriate to effect such transactions.

5.2. DELIVERY OF OTHER AGREEMENTS. Prior to or as of the Distribution Date, the Parties shall execute and deliver, or shall cause to be executed and delivered, each of the Operating Agreements.

5.3. PROVISION OF CORPORATE RECORDS. Prior to or as promptly as practicable after the Distribution Date, TSC shall deliver to eLoyalty all corporate books and records of eLoyalty and copies of all corporate books and records of TSC relating to the eLoyalty business, including in each case all active agreements, litigation files and government filings. From and after the Distribution Date, all books, records and copies so delivered shall be the property of eLoyalty.

ARTICLE VI

NO REPRESENTATIONS AND WARRANTIES

Except as expressly set forth herein or in any Operating Agreement, TSC does not represent or warrant in any way (i) as to the value or

freedom from encumbrance of, or any other matter concerning, any of the Transferred Assets or (ii) as to the legal sufficiency to convey title to any of the Transferred Assets on the execution, delivery and filing of the Conveyancing Instruments. ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN "AS IS, WHERE IS" BASIS WITHOUT ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, MARKETABILITY, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, and eLoyalty shall bear the economic and legal risks that any conveyances of such assets shall prove to be insufficient or that eLoyalty's title to any such assets shall be other than good and marketable and free of encumbrances. Except as expressly set forth in this Agreement or in any Operating Agreement, TSC does not represent or warrant that the obtaining of the consents or approvals, the execution and delivery of any amendatory agreements and the making of the filings and applications contemplated by this Agreement shall satisfy the provisions of all applicable agreements or the requirements of all applicable laws or judgments, and, subject to Section 7.4, eLoyalty shall bear

<PAGE> 25

the economic and legal risk that any necessary consents or approvals are not obtained or that any requirements of law or judgments are not complied with. Notwithstanding the foregoing, the Parties shall fully cooperate and use reasonable efforts to obtain all consents and enter into all amendatory agreements and to make all filings and applications that may be required for the consummation of the transactions contemplated by this Agreement.

ARTICLE VII

CERTAIN COVENANTS

7.1. THIRD PARTY CONSENTS. To the extent that the transactions contemplated by this Agreement require any material consents, approvals or waivers from third parties (the "Third Party Consents"), the Parties will use commercially reasonable efforts to obtain any such Third Party Consents.

7.2. MATERIAL GOVERNMENTAL APPROVALS AND CONSENTS. To the extent that the transactions contemplated by this Agreement require any approvals or consents of any Governmental Authority, the Parties will use commercially reasonable efforts to obtain any Material Governmental Approvals and Consents.

7.3. NON-ASSIGNABLE CONTRACTS. In the event and to the extent that TSC is unable to obtain any consent, approval or amendment to any Contract, lease, license or other rights relating to the eLoyalty Business that would otherwise be transferred or assigned to eLoyalty as contemplated by this Agreement or any other agreement or document contemplated hereby, (i) TSC shall continue to be bound thereby and the purported transfer or assignment to eLoyalty shall automatically be deemed deferred until such time as all legal impediments are removed and/or all necessary consents have been obtained, and

(ii) unless not permitted by the terms thereof or by law, eLoyalty shall pay, perform and discharge fully all of the obligations of TSC thereunder from and after the Distribution Date, or such earlier date as such transfer or assignment would otherwise have taken place, and indemnify TSC for all indemnifiable Losses arising out of such performance by eLoyalty. TSC shall, without further consideration therefor, pay and remit to eLoyalty promptly all monies, rights and other considerations received in respect of such performance. TSC shall exercise or exploit its rights and options under all such Contracts, leases, licenses and other rights and commitments referred to in this Section 7.3 only as reasonably directed by eLoyalty and at eLoyalty's expense. If and when any such consent shall be obtained or such Contract, lease, license or other right shall otherwise become assignable or be able to be novated, TSC shall promptly assign and novate (to the extent permissible) all of its rights and obligations thereunder to eLoyalty without payment of further consideration, and eLoyalty shall, without the payment of any further consideration therefor, assume such rights and obligations. To the extent that the assignment of any Contract, lease, license or other right (or the proceeds thereof) pursuant to this Section 7.3 is prohibited by law, the assignment provisions of this Section 7.3 shall operate to create a subcontract with eLoyalty to perform each relevant unassignable TSC Contract at a subcontract price equal to the monies, rights and other considerations received by TSC with respect to the performance by eLoyalty under such

<PAGE> 26

subcontract.

7.4. NOVATION OF ASSUMED LIABILITIES. (a) Except as otherwise specifically provided in Section 4.6 with respect to Shared Contracts and elsewhere in this Agreement, it is expressly understood and agreed to by the Parties that upon the assumption by eLoyalty of the Assumed Liabilities, TSC, its Subsidiaries and their respective officers, directors and employees shall be released unconditionally by eLoyalty from any and all Liability, whether joint, several or joint and several, for the discharge, performance or observance of any of the Assumed Liabilities, so that eLoyalty will be solely responsible for such Assumed Liabilities.

(b) eLoyalty, at the reasonable request of TSC, shall use commercially reasonable efforts to obtain, or cause to be obtained, any consent, approval, release, substitution or amendment required to novate (including with respect to any federal government contract) or assign all obligations under the Assumed Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements other than eLoyalty; provided, however, that eLoyalty shall not be obligated to pay any consideration therefor to any third party from whom such consents, approvals, releases, substitutions or amendments are requested.

(c) If eLoyalty is unable to obtain, or to cause to be obtained, any such required consent, approval, release, substitution or

amendment, TSC shall continue to be bound by such Assumed Liability and, unless not permitted by law or the terms thereof, eLoyalty shall, as agent or subcontractor for TSC, pay, perform and discharge fully all of the obligations or other Liabilities of TSC thereunder from and after the date hereof. eLoyalty shall indemnify and hold harmless TSC against any Liabilities arising in connection with such Assumed Liability or with eLoyalty's payment, performance and discharge of such Assumed Liability. Except as otherwise set forth in this Agreement, TSC shall, without further consideration, pay and remit, or cause to be paid or remitted, to eLoyalty promptly the after-tax amount of all money, rights and other consideration received by it in respect of such performance (unless any such consideration is a Retained Asset), increased by any actual tax benefit derived by TSC as a result of such payment or remittance (with such tax benefit determined pursuant to Section 12.5(d)). If and when any such consent, approval, release, substitution or amendment shall be obtained or such Assumed Liability shall otherwise become assignable or be able to be novated, TSC shall thereafter assign, or cause to be assigned, all of its rights, obligations and other Liabilities thereunder to eLoyalty without payment of further consideration and eLoyalty shall, without the payment of any further consideration, assume such rights and obligations.

7.5. FURTHER ASSURANCES. (a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws, regulations and agreements to consummate and

make effective the Distribution and the other agreements and documents contemplated hereby. Without limiting the generality of the foregoing, each Party shall cooperate with the other Party to execute and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any governmental or regulatory authority or any other Person under any permit, license, Contract or other

<PAGE> 27

instrument, and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement, in order to confirm the title of eLoyalty to all of the eLoyalty Business, to put eLoyalty in actual possession and operating control thereof and to permit eLoyalty to exercise all rights with respect thereto and to effectuate the provisions and purposes of this Agreement and the other agreements and documents contemplated hereby or thereby.

(b) If, as a result of mistake or oversight, any asset reasonably necessary to the conduct of the eLoyalty Business is not transferred to eLoyalty, or any asset reasonably necessary to the conduct of the Retained Business is transferred to eLoyalty, TSC and eLoyalty shall negotiate in good faith after the Distribution Date to determine whether such asset should be transferred to eLoyalty or to TSC, as the case may be, and/or the terms and

conditions upon which such asset shall be made available to eLoyalty or to TSC, as the case may be. Unless expressly provided to the contrary in this Agreement or any Operating Agreement, if, as a result of mistake or oversight, any Liability arising out of or relating to the eLoyalty Business is retained by TSC, or any Liability arising out of or relating to the Retained Business is assumed by eLoyalty, TSC and eLoyalty shall negotiate in good faith after the Distribution Date to determine whether such Liability should be transferred to eLoyalty or TSC, as the case may be, and/or the terms and conditions upon which any such Liability shall be transferred.

(c) If either Party identifies any commercial or other service that is needed to assure a smooth and orderly transition of the businesses in connection with the consummation of the transactions contemplated hereby or any desired modification to any such service, including any service that is governed by the provisions of any Operating Agreement, the Parties shall give reasonable notice of such service or proposed modification, and shall cooperate in implementing any such service or modification and in determining the mutually acceptable arm's-length basis on which one Party will provide such service to the other Party.

7.6. NOMINEE SHARES. TSC agrees to use commercially reasonable efforts to cause to be transferred to, or as directed by, eLoyalty all director's qualifying or other shares of capital stock of any of the transferred Subsidiaries held as of the Distribution Date by persons who are not employees of eLoyalty. eLoyalty agrees to use commercially reasonable efforts to cause to

be transferred to, or as directed by, TSC all director's qualifying or other shares of capital stock of any TSC Subsidiary other than eLoyalty and the transferred Subsidiaries held as of the Distribution Date by employees of eLoyalty.

7.7. COLLECTION OF ACCOUNTS RECEIVABLE. (a) TSC shall be entitled to control all collection actions related to the Retained Assets, including the determination of what actions are necessary or appropriate and when and how to take any such action.

(b) eLoyalty shall be entitled to control all collection actions related to the Transferred Assets, including the determination of what actions are necessary or appropriate and when and how to take any such action.

(c) If, after the Distribution Date, eLoyalty shall receive any remittance from any

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account debtors with respect to the accounts receivable arising out of the Retained Assets or other amounts due TSC in respect of services rendered by TSC after the Distribution Date, or TSC shall receive any remittance from any account debtors with respect to the accounts receivable arising out of the Transferred Assets or other amounts due eLoyalty in respect of services rendered by eLoyalty after the Distribution Date, such Party shall receive and deposit

the after-tax amount of such remittance and deliver cash in an amount equal thereto to the other Party, increased by any actual tax benefit derived by such Party as a result of payment to such other Party (with such tax benefit determined pursuant to Section 12.5(d)) as soon as practicable and, in any event, within five (5) business days of receiving such remittance. The Parties shall reconcile any amounts due and owed under this Section 7.7 on a daily basis.

(d) Each Party shall deliver to the other such schedules and other information with respect to the accounts receivable included in the Transferred Assets and those not included therein as each shall reasonably request from time to time in order to permit such Parties to reconcile their respective records and to monitor the collection of all accounts receivable (whether or not Transferred Assets). Each Party shall afford the other reasonable access to its books and records relating to any accounts receivable.

7.8. ELECTION OF ELOYALTY BOARD OF DIRECTORS. Prior to the Distribution Date, TSC agrees to vote all shares of eLoyalty Common Stock held by it in favor of the nominees to the Board of Directors of eLoyalty, as set forth on Exhibit F hereto.

7.9. LATE PAYMENTS. Except as expressly provided to the contrary in this Agreement or in any Operating Agreement, any amount not paid when due pursuant to this Agreement or any Operating Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid

within thirty (30) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus 2%.

7.10. REGISTRATION AND LISTING. Prior to the Distribution Date:

(a) TSC and eLoyalty shall prepare a registration statement on Form 10, including such amendments or supplements thereto as may be necessary (together, the "Registration Statement") to effect the registration of the eLoyalty Common Stock under the Exchange Act, which Registration Statement shall include an information statement to be sent by TSC to its stockholders in connection with the Distribution (the "Information Statement"). eLoyalty shall file the Registration Statement with the SEC and shall use commercially reasonable efforts to cause the Registration Statement to become and remain effective under the Exchange Act as soon as reasonably practicable. After the Registration Statement becomes effective, TSC shall mail the Information Statement to the holders of TSC Common Stock as of the Record Date.

(b) The Parties shall use commercially reasonable efforts to take all such action as may be necessary or appropriate under state and foreign securities and "Blue Sky" laws in connection with the transactions contemplated by this Agreement.

<PAGE> 29

(c) TSC and eLoyalty shall prepare, and eLoyalty shall file and seek to make effective, an application for the listing of the eLoyalty Common Stock on the NASDAQ, subject to official notice of issuance.

(d) The Parties shall cooperate in preparing, filing with the SEC and causing to become effective any registration statements or amendments thereto that are necessary or appropriate in order to effect the transactions contemplated hereby or to reflect the establishment of, or amendments to, any employee benefit plans contemplated hereby.

7.11. NO NONCOMPETITION; NONHIRING; NONSOLICITATION. (a) After the Distribution Date, neither Party shall have any duty to refrain from (i) engaging in the same or similar activities or lines of business as the other Party, (ii) doing business with any potential or actual supplier or customer of the other Party or (iii) engaging in, or refraining from, any other activities whatsoever relating to any of the potential or actual suppliers or customers of the other Party.

(b) During the period beginning on December 1, 1999 and ending eighteen (18) months after such date, neither TSC nor eLoyalty shall, nor shall either Party permit any of its respective Subsidiaries, Affiliates or agents to,

directly or indirectly, without the prior written consent of the other, actively solicit or recruit for employment any then current employee of the other Party or of any of the other Party's Subsidiaries or Affiliates. However, nothing contained in this Section 7.11(b) shall (i) prohibit the hiring of any employee who is seeking employment on his or her own initiative without prior contact initiated by any employee or agent of the company where employment is sought, or any of such company's Affiliates, provided that such employee has obtained authorization from an officer (or a direct report to a current officer) of his or her current employer; or (ii) prohibit TSC or eLoyalty or any of their respective Subsidiaries or Affiliates from hiring any person who has terminated employment with the other Party. The foregoing restriction shall cease to apply on July 1, 2001.

7.12. LITIGATION. (a) On or as of the Distribution Date, eLoyalty shall assume and pay all Liabilities that may result from the Assumed Actions (as hereinafter defined) and all fees and costs relating to the defense of the Assumed Actions, including attorneys' fees and costs incurred after the Distribution Date. "Assumed Actions" shall mean those cases, claims and investigations (on which TSC, its Subsidiaries or its Affiliates, other than eLoyalty, are a defendant or the party against whom the claim or investigation is directed) primarily related to the eLoyalty Business.

(b) TSC and its Subsidiaries shall transfer the Transferred Actions (as hereinafter defined) to eLoyalty, and eLoyalty shall receive and

have the benefit of all of the proceeds of such Transferred Actions. "Transferred Actions" shall mean those cases and claims (on which TSC, its Subsidiaries or its Affiliates are a plaintiff or claimant) primarily relating to the eLoyalty Business.

7.13. ELOYALTY BANK ACCOUNTS. On or prior to the Distribution Date, TSC and its Subsidiaries shall transfer the bank accounts set forth on Schedule 7.13 hereto to eLoyalty. eLoyalty shall cause any amounts received, by mistake or otherwise, in such accounts after the Distribution Date on account of the Retained Business to be transferred promptly to TSC and its

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Subsidiaries, as appropriate. TSC shall cause any amounts received, by mistake or otherwise, after the Distribution Date on account of the eLoyalty Business to be transferred promptly to eLoyalty.

7.14. SIGNS; USE OF COMPANY NAME. As soon as practicable, and in any event within sixty (60) days after the Distribution Date, the Parties, at eLoyalty's expense, shall remove (or, if necessary, on an interim basis cover up) any and all exterior and interior signs and identifiers that refer or pertain to TSC or the Retained Business on the Transferred Assets, in the case of eLoyalty, or that refer or pertain to eLoyalty or the Transferred Business on the Retained Assets, in the case of TSC. After such period, (i) eLoyalty shall not use or display the names "TSC," "Technology Solutions Company" or any

variations thereof, or other trademarks, tradenames, logos or identifiers using any of such names or otherwise owned by or licensed to TSC that have not been assigned or licensed to eLoyalty, and (ii) TSC shall not use or display the name "eLoyalty," "eLoyalty Corporation" or any variations thereof, or other trademarks, tradenames, logos or identifiers using any of such names or otherwise owned by or licensed to eLoyalty that have not been assigned or licensed to TSC (collectively, the "Non-Permitted Names"), without the prior written consent of the other Party; provided, however, that notwithstanding the foregoing, nothing contained in this Agreement shall prevent either Party from using the other's name in public filings with Governmental Authorities, materials intended for distribution to either Party's stockholders or any other communication in any medium that describes the relationship between the Parties.

7.15. REASONABLE EFFORTS. Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agrees to use all commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including (i) the obtaining of all necessary actions or non-actions, waivers, consents and approvals from Governmental Authorities and the making of all necessary registrations and filings (including filings with Governmental Authorities) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority (including those in connection with

the HSR Act, if any), (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement.

7.16. USE OF TRANSFERRED INTELLECTUAL PROPERTY. As of the Distribution Date, and except as permitted pursuant to the terms and conditions of the Intellectual Property License Agreements, TSC and its Subsidiaries, other than eLoyalty and its Subsidiaries, shall cease all use of the Transferred Intellectual Property, and TSC agrees to terminate any license granted to its Subsidiaries, other than eLoyalty and its Subsidiaries, with respect to the foregoing.

<PAGE> 31 ARTICLE VIII

CONDITIONS TO THE DISTRIBUTION

The obligation of TSC to effect the Distribution is subject to the satisfaction or the waiver by TSC, at or prior to the Distribution Date, of each of the following conditions:

8.1. APPROVAL BY TSC BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby, including the declaration of the Distribution, shall have been duly approved by the Board of Directors of TSC in accordance with applicable law and the Certificate of Incorporation, as amended, and By-laws of TSC.

8.2. RECEIPT OF IRS PRIVATE LETTER TAX RULING. TSC shall have received a ruling from the IRS or, at TSC's sole discretion, an opinion of its tax counsel Sidley & Austin, substantially to the effect that the Contribution will qualify as a tax-free transaction for federal income tax purposes under Section 368(a)(1)(D) or Section 351 of the Code, that the Distribution will qualify as a tax-free distribution for federal income tax purposes under Section 355 of the Code, and that no income, gain or loss will be recognized by TSC, eLoyalty or their respective stockholders upon the Contribution or the Distribution.

8.3. COMPLIANCE WITH STATE AND FOREIGN SECURITIES AND "BLUE SKY" LAWS. The Parties shall have taken all such action as may be necessary or appropriate under state and foreign securities and "blue sky" laws in connection with the Distribution.

8.4. SEC FILINGS AND APPROVALS. The Parties shall have prepared and eLoyalty shall, to the extent required under applicable law, have filed with the SEC any such documentation and any requisite no action letters

that TSC reasonably determines are necessary or desirable to effectuate the Distribution, and each Party shall use commercially reasonable efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.

8.5. FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT; NO STOP ORDER. The Registration Statement shall have been filed with and declared effective by the SEC, and no stop order suspending the effectiveness of the Registration Statement shall have been initiated or, to the knowledge of either of the Parties, threatened by the SEC.

8.6. DISSEMINATION OF INFORMATION TO TSC STOCKHOLDERS. Prior to the Distribution Date, the Parties shall have prepared and mailed to the holders of TSC Common Stock such information concerning eLoyalty, its business, operations and management, the Distribution and such other matters as TSC shall reasonably determine and as may be required by law.

8.7. APPROVAL OF NASDAQ LISTING APPLICATION. The eLoyalty Common Stock to be distributed in the Distribution shall have been approved for listing on the NASDAQ, subject to official notice of issuance.

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8.8. RECEIPT OF VIABILITY AND FAIRNESS OPINION OF FINANCIAL

ADVISOR. The TSC Board of Directors shall have received a written opinion of Credit Suisse First Boston, in form acceptable to TSC, to the effect that (i) the Distribution will not have a material adverse effect on the financial viability of TSC or of eLoyalty through the period ending December 31, 200__, and (ii) the Distribution is fair to the TSC stockholders from a financial point of view, which opinion shall not have been withdrawn or modified.

8.9. OPERATING AGREEMENTS. Each of the Operating Agreements shall have been executed and delivered, and each of such agreements shall be in full force and effect.

8.10. RESIGNATIONS. On or prior to the Distribution Date, TSC shall cause all of its designees to resign or to be removed as officers and from all Boards of Directors or similar governing bodies of eLoyalty and its Affiliates.

8.11. CONSENTS. (a) All Material Governmental Approvals and Consents required to permit the valid consummation of the Distribution shall have been obtained without any conditions being imposed that would have a material adverse effect on TSC or eLoyalty.

(b) TSC shall have obtained the consent, approval or waiver of each Person (other than the Governmental Authorities referred to in Section 8.11(a)) whose consent, approval or waiver shall be required in connection with the Distribution, except those for which the failure to obtain such consents or

approvals would not, in the reasonable opinion of TSC, individually or in the aggregate have a material adverse effect on TSC, eLoyalty or the consummation of the Distribution.

8.12. NO ACTIONS. No action, suit or proceeding shall have been instituted or threatened by or before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator to restrain, enjoin or otherwise prevent the Distribution or the other transactions contemplated this Agreement (including but not limited to a stop order with respect to the effectiveness of the Registration Statement), and no order, injunction, judgment, ruling or decree issued by any court of competent jurisdiction shall be in effect restraining the Distribution or such other transactions.

8.13. CONSUMMATION OF PRE-DISTRIBUTION TRANSACTIONS. The pre-Distribution transactions contemplated by Articles III-V of this Agreement shall have been consummated in all material respects.

8.14. NO OTHER EVENTS. No other events or developments shall have occurred that, in the judgment of the TSC Board of Directors, would result in the Distribution having a material adverse effect on TSC or its stockholders.

8.15. SATISFACTION OF CONDITIONS. The satisfaction of the foregoing conditions are for the sole benefit of TSC and shall not give rise to or create any duty on the part of TSC or the TSC Board of Directors to waive or

not waive any such condition, to effect the Distribution

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or in any way limit TSC's power of termination set forth in Section 15.13 .

ARTICLE IX

EMPLOYEES AND EMPLOYEE BENEFIT MATTERS

9.1. EMPLOYMENT OF ELOYALTY EMPLOYEES. On the Asset Transfer Date, eLoyalty shall, or shall cause its Subsidiaries to, employ each employee of the eLoyalty Business ("Transferred Employees") set forth on Schedule 9.1 hereto, and TSC shall cause all such Transferred Employees to resign from all positions as officers or employees of TSC and its Subsidiaries. eLoyalty and TSC (and their respective Subsidiaries) shall use commercially reasonable efforts to accomplish any transfers of employment required by this Section 9.1 in a timely manner. As of the Asset Transfer Date, eLoyalty shall assume each employment agreement between TSC and a Transferred Employee and shall be solely responsible for all of the obligations of the employer thereunder.

9.2. SEVERANCE. (a) Transferred Employees shall not be eligible for any severance benefits from TSC or its Subsidiaries or Affiliates as a result of either their employment with eLoyalty or its Subsidiaries or

Affiliates or their subsequent termination of employment with eLoyalty or its Subsidiaries or Affiliates.

(b) eLoyalty (or the applicable eLoyalty Subsidiary) shall have the obligation to pay severance benefits to any employee or former employee of the eLoyalty Business whose employment terminates on or after January 1, 2000. TSC shall continue to have the obligation to pay severance benefits to any employee or former employee of the eLoyalty Business whose employment terminated prior to January 1, 2000.

9.3. WITHDRAWAL FROM PARTICIPATION IN TSC PLANS AND ESTABLISHMENT OF ELOYALTY PLANS. (a) No later than the Distribution Date, Transferred Employees shall cease to participate in the TSC employee benefit plans and programs (the "TSC Plans"), except as otherwise specifically provided in this Article IX.

(b) No later than the Distribution Date, eLoyalty or an eLoyalty Subsidiary shall establish its own employee benefit plans and programs for the benefit of eligible employees of eLoyalty and its Subsidiaries that shall be substantially similar to the TSC Plans, including but not limited to a 401(k) savings plan (the "eLoyalty Savings Plan"), a nonqualified executive deferred compensation plan (the "eLoyalty Deferred Compensation Plan"), a medical and dental plan, a group vision care plan, a cafeteria plan, a group term life and accidental death and dismemberment plan, a long-term disability plan and a group legal expense plan.

9.4. TRANSFER OF SAVINGS PLAN ACCOUNT BALANCES. Subject to applicable law and the provisions of the Technology Solutions Company d.b.a. TSC 401(k) Plan (the "TSC Savings Plan"), as soon as administratively practicable following the establishment of the eLoyalty Savings Plan, or effective as of any other date as agreed to in writing by the plan administrator for

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the TSC Savings Plan and the plan administrator for the eLoyalty Savings Plan, the account balances (including outstanding loans) of all TSC Savings Plan participants who are Transferred Employees shall be transferred from the TSC Savings Plan to the eLoyalty Savings Plan. Each Transferred Employee shall receive credit for all purposes under the eLoyalty Savings Plan for periods of service with TSC or any of its Affiliates. The plan administrator for the eLoyalty Savings Plan shall take any other action reasonably requested by the plan administrator for the TSC Savings Plan that is necessary or advisable, in the opinion of the plan administrator for the TSC Savings Plan, to maintain the tax-qualified status of the TSC Savings Plan or to avoid the imposition of any penalties with respect to such plan.

9.5. WELFARE BENEFITS PROVIDED UNDER ELOYALTY PLANS. (a) Each Transferred Employee who becomes eligible to participate in an eLoyalty welfare benefit plan shall be credited under such plan with (i) any deductibles and copayments paid by such employee during the same plan year under the medical or

dental plan maintained by TSC and (ii) periods of service with TSC or any of its Affiliates for all purposes under such plan. Amounts paid under a TSC medical or dental plan that are taken into account for purposes of determining each eLoyalty employee's lifetime maximum benefits under such plan shall be taken into account for purposes of determining such eLoyalty employee's lifetime maximum benefits under the eLoyalty medical or dental plan.

(b) eLoyalty (or the applicable eLoyalty Subsidiary) shall pay all costs associated with the provision of disability benefits to any employee or former employee of the eLoyalty Business, other than an employee or former employee whose long-term disability benefits commenced prior to the earlier of (i) the Distribution Date or (ii) the effective date of the eLoyalty long-term disability insurance plan. Any employee or former employee of the eLoyalty Business receiving benefits under the TSC long-term disability insurance plan prior to such date shall continue to receive benefits under the terms of such plan and the insurance contract used to fund such plan, and neither eLoyalty nor any eLoyalty Subsidiary shall be charged for the payment of such benefits.

(c) TSC (or the applicable TSC Subsidiary) shall pay all claims under the TSC medical plan (including dental benefits) relating to Transferred Employees that have been incurred but not paid prior to the earlier of (i) the Distribution Date or (ii) the effective date of the eLoyalty medical plan, but only if claims for such costs are submitted in written form to the authorized agents of TSC (or the applicable TSC Subsidiary) during the nine-month period beginning on such date.

(d) As of the earlier of (i) the Distribution Date or (ii) the date eLoyalty adopts a cafeteria plan, within the meaning of Section 125 of the Code, for the benefit of its employees, eLoyalty (or the applicable eLoyalty Subsidiary) shall assume all of the obligations of TSC under its cafeteria plan with respect to participants who are Transferred Employees.

9.6. STOCK PURCHASE PLANS. No later than the record date of the Distribution, Transferred Employees shall cease to be eligible to purchase TSC Common Stock under the terms of the TSC 1995 Employee Stock Purchase Plan, and as of the later of (i) the first business day after the record date of the Distribution or (ii) the first day on which eLoyalty Common Stock is

<PAGE> 35

traded on a "when issued" basis, Transferred Employees shall become eligible to participate in the eLoyalty 1999 Employee Stock Purchase Plan.

9.7. DEFERRED COMPENSATION PLAN. No later than the Distribution Date, eLoyalty shall establish the eLoyalty Deferred Compensation Plan, which shall be substantially similar to the TSC Executive Deferred Compensation Plan (the "TSC Deferred Compensation Plan") in effect immediately prior to the date the eLoyalty Deferred Compensation Plan is established. As of its effective date, the eLoyalty Deferred Compensation Plan shall assume all Liabilities with respect to amounts credited to the accounts of Transferred

Employees under the TSC Deferred Compensation Plan, and the TSC Deferred Compensation Plan shall be relieved of all Liabilities for such benefits and payments thereof. On or before the Distribution Date, TSC shall direct the trustee of the trust established by TSC with respect to the TSC Deferred Compensation Plan to transfer to the trust established by eLoyalty with respect to the eLoyalty Deferred Compensation Plan an amount equal to the fair market value (determined as of the date of transfer) of the amount credited to the accounts of Transferred Employees under the TSC Deferred Compensation Plan.

9.8. STOCK OPTIONS. (a) As of the Distribution, each outstanding nonqualified option to purchase shares of TSC Common Stock held by a Transferred Employee or a director of eLoyalty (who is not also a director of TSC) shall be converted into a substitute option to purchase shares of eLoyalty Common Stock. The exercise price of each substitute option, and the number of shares of eLoyalty Common Stock subject thereto, shall be equal to the exercise price of the existing TSC option and the number of shares subject thereto, adjusted to reflect the Distribution based on a comparison of (i) the trading price of TSC Common Stock prior to the Distribution (the "Combined Value") and (ii) the trading price of eLoyalty Common Stock after the Distribution (the "eLoyalty Value").

(b) As of the Distribution, each outstanding nonqualified option to purchase shares of TSC Common Stock that was granted on or before June 21, 1999 to a person other than a person described in Section 9.8(a) shall be converted into an adjusted option to purchase TSC Common Stock and a substitute

option to purchase shares of eLoyalty Common Stock. Such options shall be converted in a manner that preserves the aggregate exercise price of each option, and allocates the exercise price between the TSC option and the eLoyalty option based on a comparison of (i) the eLoyalty Value and (ii) the trading price of TSC Common Stock after the Distribution (the "TSC Value").

(c) Each nonqualified option to purchase TSC Common Stock granted after June 21, 1999 to a person other than a person described in Section 9.8(a) and each option to purchase eLoyalty Common Stock (other than an option granted in substitution of an outstanding option to purchase TSC Common Stock) shall continue solely as an option to purchase TSC Common Stock or eLoyalty Common Stock, as the case may be. Each such option to purchase TSC Common Stock shall be adjusted to reflect the Distribution, based on a comparison of (i) the Combined Value and (ii) the TSC Value. Each such option to purchase eLoyalty Common Stock shall not be adjusted.

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(d) Each option to purchase TSC Common Stock that is an incentive stock option, within the meaning of Section 422 of the Code, shall be converted into an incentive stock option to purchase the stock of the corporation with which the optionee is employed immediately after the Distribution. Such options converted into substitute options to purchase eLoyalty Common Stock shall be adjusted in the manner described in Section

9.8(a) and such options converted into adjusted options to purchase TSC Common Stock shall be adjusted in the manner described in Section 9.8(c).

(e) TSC and eLoyalty agree to assist each other as appropriate with respect to the ongoing administration of the outstanding options issued to employees of the other Party, or issued by the other Party to its employees, under the TSC stock incentive plans and the eLoyalty stock incentive plans, as applicable.

9.9. WORKERS' COMPENSATION. eLoyalty shall assume the Liability for any workers' compensation or similar workers' protection claims with respect to any employee of the eLoyalty Business, whether incurred prior to, on or after the Distribution Date which are the result of an injury or illness originating prior to or on the Distribution Date.

9.10. WARN ACT. eLoyalty and its Subsidiaries agree that they shall not, at any time during the 90-day period following the Distribution Date, (i) effectuate a "plant closing" as defined in the Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act") affecting any site of employment or operating units within any site of employment of the eLoyalty Business, or (ii) take any action to precipitate a "mass layoff" as defined in the WARN Act affecting any site of employment of the eLoyalty Business, except, in either case, after complying fully with the notice and other requirements of the WARN Act. eLoyalty agrees to indemnify TSC and its Subsidiaries and to defend and hold harmless TSC and its Subsidiaries from and against any and all

claims, losses, damages, expenses, obligations and liabilities (including attorney's fees and other costs of defense) that TSC and its Subsidiaries may incur in connection with any suit or claim of violation brought against TSC under the WARN Act, which relates in whole or in part to actions taken by eLoyalty or its Subsidiaries with regard to any site of employment of eLoyalty or operating units within any site of employment of the eLoyalty Business.

9.11. INFORMATION TO BE PROVIDED TO TSC. eLoyalty (or the applicable eLoyalty Subsidiary) shall provide any information that TSC (or any TSC Subsidiary) may reasonably request, including but not limited to information relating to dates of termination of employment, in order to provide benefits to any eligible employee of eLoyalty or any of its Subsidiaries under the terms and conditions described herein or under the applicable TSC Plans. Any information relating to an employee's termination of employment shall be provided by eLoyalty (or the applicable eLoyalty Subsidiary) to TSC as soon as available to eLoyalty or any of its Subsidiaries, but in any event no later than 30 days after such information is made available to eLoyalty or any such Subsidiaries. eLoyalty (or the applicable eLoyalty Subsidiary) shall, as necessary, update the system used to keep such information in such timely manner as is required to administer the TSC Plans.

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ARTICLE X

INSURANCE MATTERS

10.1. INSURANCE PRIOR TO THE DISTRIBUTION DATE. eLoyalty does hereby agree that TSC shall not have any Liability whatsoever as a result of the insurance policies and practices of TSC in effect at any time prior to the Distribution Date, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy and the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

10.2. OWNERSHIP OF EXISTING POLICIES AND PROGRAMS. TSC or one or more of its Subsidiaries shall continue to own all property, casualty and liability insurance policies and programs, including, without limitation, primary and excess general liability, errors and omissions, automobile, workers' compensation, property, fire, crime and surety insurance policies, in effect on or before the Distribution Date (collectively, the "TSC Policies" and individually, a "TSC Policy"). TSC shall use reasonable efforts to maintain the TSC Policies in full force and effect up to and including the Distribution Date, and, subject to the provisions of this Agreement, TSC and its Subsidiaries shall retain all of their respective rights, benefits and privileges, if any, under the TSC Policies. Nothing contained herein shall be construed to be an attempted assignment of or to change the ownership of the TSC Policies.

10.3. PROCUREMENT OF INSURANCE FOR ELOYALTY. To the extent not already provided for by the terms of a TSC Policy, TSC shall use reasonable efforts to cause eLoyalty to be named as an additional insured under TSC Policies whose effective policy periods include the Distribution Date, in respect of claims arising out of or relating to periods prior to the Distribution Date; provided, however, that nothing contained herein shall be construed to require TSC or any of its Subsidiaries to pay any additional premium or other charges in respect to, or waive or otherwise limit any of its rights, benefits or privileges under, any TSC Policy in order to effect the naming of eLoyalty as such an additional insured.

10.4. ACQUISITION AND MAINTENANCE OF POST-DISTRIBUTION ELOYALTY INSURANCE POLICIES AND PROGRAMS. Commencing on and as of the Distribution Date, eLoyalty shall be responsible for establishing and maintaining separate property, casualty and liability insurance policies and programs (including, without limitation, primary and excess general liability, errors and omissions, automobile, workers' compensation, property, fire, crime, surety and other similar insurance policies) for activities and claims involving eLoyalty or any of its Subsidiaries or Affiliates. In addition to the foregoing, eLoyalty shall obtain insurance covering its contractual obligations to indemnify TSC and the TSC Indemnified Parties under this Agreement and shall arrange for TSC and the TSC Indemnified Parties to be named insureds under such policies. All insurance policies required to be maintained by eLoyalty shall be with insurers reasonably acceptable to TSC with respect to financial condition and claims paying ability. eLoyalty will exercise commercially reasonable

efforts to secure liability insurance to avoid potential gaps in coverage for claims arising from events prior to the Distribution Date, which gap would not exist

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had the eLoyalty Business continued to be covered with the same retroactive dates existing in the TSC Policies in effect on the Distribution Date. eLoyalty and each of its Subsidiaries and Affiliates, as appropriate, shall be responsible for all administrative and financial matters relating to insurance policies established and maintained by eLoyalty and its Subsidiaries or Affiliates for claims relating to any period on or after the Distribution Date involving eLoyalty or any of its Subsidiaries or Affiliates. Notwithstanding any other agreement or understanding to the contrary, except as set forth in Section 10.6 with respect to claims administration and financial administration of the TSC Policies, neither TSC nor any of its Subsidiaries or Affiliates shall have any responsibility for or obligation to eLoyalty or any of its Subsidiaries or Affiliates relating to property and casualty insurance matters for any period, whether prior to, on or after the Distribution Date.

10.5. ELOYALTY DIRECTORS' AND OFFICERS' INSURANCE. TSC shall use commercially reasonable efforts to cause the persons currently serving as officers and/or directors of TSC or any of its Subsidiaries to be covered for a period of three (3) years from the Distribution Date by the directors' and officers' liability insurance policy maintained by TSC (including corporate

reimbursement) (provided that TSC may substitute therefor policies of at least the same coverage and amounts containing terms and conditions that are not less advantageous than such policy) with respect to matters covered under the existing policy occurring prior to the Distribution Date that were committed by such officers and/or directors in their capacity as such; provided, however, that in no event shall TSC be required to expend with respect to any year more than 200% of the current annual premium expended by TSC (the "Insurance Amount") to maintain or procure insurance coverage pursuant hereto; and provided, further, that if TSC is unable to maintain or obtain the insurance called for by this Section 10.5, TSC shall use commercially reasonable efforts to obtain as much comparable insurance as available for the Insurance Amount. In the event TSC or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of TSC assume the obligations set forth in this Section 10.5. The provisions of this Section 10.5 are intended to be for the benefit of, and shall be enforceable by, each such officer and director and his or her heirs and representatives. As provided in Section 12.5, any amount eLoyalty is required to pay to TSC as an indemnity under this Agreement is reduced to the extent TSC receives insurance proceeds from the above coverage, but only to the extent such proceeds are actually received by TSC.

10.6. POST-DISTRIBUTION INSURANCE CLAIMS ADMINISTRATION. TSC

and its Subsidiaries shall have the primary right, responsibility and authority for claims administration and financial administration of claims that relate to or affect the TSC Policies. Upon notification by eLoyalty or one of its Subsidiaries or Affiliates of a claim relating to eLoyalty or a Subsidiary or Affiliate thereof under one or more of the TSC Policies, TSC shall cooperate with eLoyalty in asserting and pursuing coverage and payment for such claim by the appropriate insurance carrier(s). In asserting and pursuing such coverage and payment, TSC shall have sole power and authority to make binding decisions, determinations, commitments and stipulations on its own

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behalf and on behalf of eLoyalty and its Subsidiaries and Affiliates, which decisions, determinations, commitments and stipulations shall be final and conclusive if reasonably made to maximize the overall economic benefit of the TSC Policies. eLoyalty and its Subsidiaries and Affiliates shall assume responsibility for, and shall pay to the appropriate insurance carriers or otherwise, any premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles, retentions or other charges (collectively, "Insurance Charges") whenever arising, which shall become due and payable under the terms and conditions of any applicable TSC Policy in respect of any liabilities, losses, claims, actions or occurrences, whenever arising or becoming known, involving or relating to any of the assets, businesses, operations or liabilities of eLoyalty or any of its Subsidiaries or Affiliates, whether the same relate to the period prior to, on or after the Distribution

Date. To the extent that the terms of any applicable TSC Policy provide that TSC or any of its Subsidiaries shall have an obligation to pay or guarantee the payment of any Insurance Charges relating to eLoyalty or any of its Subsidiaries, TSC shall be entitled to demand that eLoyalty make such payment directly to the Person or entity entitled thereto. In connection with any such demand, TSC shall submit to eLoyalty a copy of any invoice received by TSC pertaining to such Insurance Charges together with appropriate supporting documentation, to the extent available. In the event that eLoyalty fails to pay any such Insurance Charges when due and payable, whether at the request of the Person entitled to payment or upon demand by TSC, TSC and its Subsidiaries may (but shall not be required to) pay such insurance charges for and on behalf of eLoyalty and, thereafter, eLoyalty shall forthwith reimburse TSC for such payment. Subject to the other provisions of this Article X, the retention by TSC of the TSC Policies and the responsibility for claims administration and financial administration of such policies are in no way intended to limit, inhibit or preclude any right of eLoyalty, TSC or any other insured to insurance coverage for any Insured Claims under the TSC Policies.

10.7. NON-WAIVER OF RIGHTS TO COVERAGE. An insurance carrier that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto, or, solely by virtue of the provisions of this Article X, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurance carrier or any third party shall be entitled to a windfall (i.e., a benefit they would not be entitled to receive had no Distribution occurred or in the absence of the provisions of this

Article X) by virtue of the provisions hereof.

10.8. SCOPE OF AFFECTED POLICIES OF INSURANCE. The provisions of this Article X relate solely to matters involving liability, casualty and workers' compensation insurance, and shall not be construed to affect any obligation of or impose any obligation on the Parties with respect to any life, health and accident, dental or medical insurance policies applicable to any of the officers, directors, employees or other representatives of the Parties or their Affiliates.

ARTICLE XI

EXPENSES

11.1. ALLOCATION OF EXPENSES. (a) Except as otherwise provided in this

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Agreement or any other agreement contemplated hereby, or as otherwise agreed to in writing by the Parties, all fees and expenses incurred in connection with the transactions contemplated hereby or thereby shall be paid by TSC. Specifically, (i) TSC shall absorb all of the costs associated with the dedication of internal resources and personnel to such transaction at all times

prior to the Distribution Date, and (ii) TSC shall pay all fees and expenses that are related directly to the implementation of the Distribution transactions on or prior to the Distribution Date.

(b) Without limiting the generality of the foregoing, TSC shall be solely responsible for the following costs incurred in connection with the transactions contemplated hereby: (i) the reasonable fees and expenses of Sidley & Austin in connection with its representation of TSC; (ii) the reasonable fees and expenses of investment banks relating to their financial advisory services rendered to TSC and eLoyalty in connection with the Distribution; (iii) the reasonable fees and expenses of PricewaterhouseCoopers LLP in connection with its audit and tax services rendered to TSC; (iv) all SEC registration and "blue sky" filing fees associated with the Registration Statement; (v) the printing, mailing and distribution of the Information Statement to TSC's stockholders; (vi) the reasonable fees and expenses of eLoyalty's Transfer Agent and registrar relating to the initial issuance of eLoyalty Shares as a dividend to TSC's stockholders; (vii) the NASDAQ listing fees for the eLoyalty Shares; (viii) the design and initial printing of certificates of the eLoyalty Shares; (ix) the design and initial printing of certificates of eLoyalty Common Stock as a dividend to TSC stockholders; (x) the development, search and registration of the name "eLoyalty"; (xi) third party vendors for software licenses; and (xii) various international professional services related directly to the Distribution.

(c) Notwithstanding Section 11.1(a) (i) above, eLoyalty shall

be solely responsible for all fees, expenses and other costs incurred in connection with the transactions contemplated hereby related to: (i) the reasonable fees and expenses of Sidley & Austin in connection with its representation of eLoyalty related to the creation of benefits plans; (ii) the reasonable fees and expenses relating to the syndication and arrangement of revolving credit facilities for eLoyalty; and (iii) the reasonable fees or expenses of any financial advisors, other than those approved by TSC, retained by eLoyalty in connection with any "road shows" or presentations to investors.

ARTICLE XII

INDEMNIFICATION

12.1. RELEASE OF PRE-DISTRIBUTION CLAIMS. (a) Except as provided in Section 12.1(b), effective as of the Distribution Date, each Party does hereby, on behalf of itself and its respective Subsidiaries and Affiliates, successors and assigns and all Persons who at any time prior to the Distribution Date have been shareholders, directors, officers, agents or employees of either Party (in each case, in their respective capacities as such), remise, release and forever discharge the other Party, its respective Subsidiaries and Affiliates, successors and assigns and all Persons who at any time prior to the Distribution Date have been shareholders, directors, officers, agents or employees of such Party (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns,

from any and all Liabilities

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whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Date, including in connection with the transactions and all other activities to implement the Distribution.

(b) Nothing contained in Section 12.1(a) shall impair any right of any Person to enforce this Agreement, any Operating Agreement or any agreements, arrangements, commitments or understandings that are specified in Section 4.5 or the applicable Schedules thereto not to terminate as of the Distribution Date, in each case in accordance with its terms. Nothing contained in Section 12.1(a) shall release any Person from:

(i) any Liability provided in or resulting from any agreement of the Parties that is specified in Section 4.5 or the applicable Schedules thereto as not to terminate as of the Distribution Date, or any other Liability specified in Section 4.5 as not to terminate as of the Distribution Date;

(ii) any Liability, contingent or otherwise, assumed, transferred, assigned, retained or allocated to a Party in accordance with, or any other Liability of any Party under, this Agreement or any Operating Agreement;

(iii) any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by one Party from the other Party prior to the Distribution Date;

(iv) any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by one Party at the request or on behalf of the other Party; or

(v) any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement for claims brought against the Parties by third Persons, which Liability shall be governed by the provisions of this Article XIII and, if applicable, the appropriate provisions of the Operating Agreements.

(c) Neither Party shall make, nor permit any of its Subsidiaries or Affiliates to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or

indemnification, against the other Party, or any other Person released pursuant to Section 12.1(a), with respect to any Liability released pursuant to Section 12.1(a).

(d) It is the intent of each of the Parties by virtue of the provisions of this Section 12.1 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Distribution Date, between the Parties (including any contractual agreements or arrangements existing or alleged to exist between the Parties on or before the Distribution Date), except as expressly set forth in Section 12.1(b). At any time, at the reasonable request of either Party, the other Party shall

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execute and deliver releases reflecting the provisions hereof.

12.2. INDEMNIFICATION BY ELOYALTY. (a) Except as provided in Section 12.5, eLoyalty shall indemnify, defend and hold harmless TSC and each of its Affiliates, directors, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "TSC Indemnified Parties"), from and against any and all Expenses or Losses incurred or suffered by TSC (and/or one or more of the TSC Indemnified Parties), in connection with, relating to, arising out of or due to, directly or

indirectly, any of the following items:

(i) any claim that the information included in the Registration Statement or the Information Statement that relates to the eLoyalty Business or any other information relating to the eLoyalty Business provided to TSC or distributed to third parties by employees of eLoyalty or individuals who were employees of the eLoyalty Business prior to the Distribution Date, is or was false or misleading with respect to any material fact or omits or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, regardless of whether the occurrence, action or other event giving rise to the applicable matter took place prior to or subsequent to the Distribution Date;

(ii) the eLoyalty Business as conducted by TSC or its Subsidiaries, Affiliates or predecessors on or at any time prior to the Distribution Date;

(iii) the Transferred Assets;

(iv) the Assumed Liabilities;

(v) the breach by eLoyalty or any of its Subsidiaries of any covenant or agreement set forth in this Agreement, any Operating Agreement or any Conveyancing Instrument, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Expense or Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported;

(vi) the employee benefits provided or the actions taken or omitted to be taken with respect thereto in connection with this Agreement or otherwise relating to the provision of employee benefits to employees or former employees of eLoyalty (or its Subsidiaries), their beneficiaries, alternate payees or any other person claiming benefits through them (except to the extent such Expenses or Losses are specifically allocated to TSC pursuant to Article IX), including, without limitation, Expenses or Losses arising in connection with (A) eLoyalty's reduction, elimination or failure to provide any benefit provided prior to or after the Distribution Date to its employees or employees of any of its Subsidiaries or (B) the transfer of account balances from the TSC Savings Plan to the eLoyalty Savings Plan where such Expenses or Losses are incurred as a result of (1) any act

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or omission by eLoyalty (or eLoyalty's representative) or (2) a determination by the IRS that the eLoyalty Savings Plan is not a tax-qualified plan; or

(vii) any use of, access to or reliance upon the technical information or data made available to eLoyalty or its Subsidiaries pursuant to Section 14.1.

(b) In addition, except as provided in Section 12.5, eLoyalty shall indemnify, defend and hold harmless the TSC Indemnified Parties from and against fifty percent (50%) of any Expenses or Losses incurred or suffered by TSC (and/or one or more of the TSC Indemnified Parties), in connection with, relating to, arising out of or due to, directly or indirectly, any claims of any infrastructure employee of TSC to the extent such claim relates to the period prior to the Distribution Date.

12.3. INDEMNIFICATION BY TSC. Except as provided in Section 12.5, TSC shall indemnify, defend and hold harmless eLoyalty and each of its Affiliates, directors, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "eLoyalty Indemnified Parties"), from and against any and all Expenses or Losses incurred or suffered by eLoyalty (and/or one or more of the eLoyalty Indemnified Parties) in connection with, relating to, arising out of or due to, directly or indirectly, any of the following items:

(a) the business (other than the eLoyalty Business) conducted by TSC or its Subsidiaries, Affiliates or predecessors on or at any time prior to the Distribution Date;

(b) the assets owned by TSC or its Subsidiaries other than the Transferred Assets;

(c) the Liabilities (including the Retained Liabilities) of TSC or its Subsidiaries other than the Assumed Liabilities;

(d) the breach by TSC or any of its Subsidiaries of any covenant or agreement set forth in this Agreement, any Operating Agreement or any Conveyancing Instrument, regardless of when or where the loss, claim, accident, occurrence, event or happening giving rise to the Expense or Loss took place, or whether any such loss, claim, accident, occurrence, event or happening is known or unknown, or reported or unreported; and

(e) TSC's reduction, elimination or failure to provide any benefit provided prior to or after the Distribution Date to its employees (or employees of its Subsidiaries), other than a benefit assumed by eLoyalty pursuant to Article IX, or any act or omission by TSC in connection with the transfer of assets and liabilities from the TSC Savings Plan to the eLoyalty Savings Plan.

12.4. APPLICABILITY OF AND LIMITATION ON INDEMNIFICATION. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE INDEMNITY OBLIGATION UNDER THIS ARTICLE XII SHALL APPLY NOTWITHSTANDING ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY INDEMNIFIED PARTY AND SHALL APPLY WITHOUT

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REGARD TO WHETHER THE LOSS, LIABILITY, CLAIM, DAMAGE, COST OR EXPENSE FOR WHICH INDEMNITY IS CLAIMED HEREUNDER IS BASED ON STRICT LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN OBLIGATION FOR CONTRIBUTION.

12.5. ADJUSTMENT OF INDEMNIFIABLE LOSSES. (a) The amount that any Party (an "Indemnifying Party") is required to pay to any Person entitled to indemnification hereunder (an "Indemnified Party") shall be reduced (including, without limitation, retroactively) by any Insurance Proceeds and other amounts actually recovered by or on behalf of such Indemnified Party in reduction of the related Expense or Loss. If an Indemnified Party receives a payment (an "Indemnity Payment") required by this Agreement from an Indemnifying Party in respect of any Expense or Loss and subsequently actually receives Insurance Proceeds or other amounts in respect of such Expense or Loss, then such Indemnified Party shall pay to the Indemnifying Party a sum equal to the lesser of (1) the after-tax amount of such Insurance Proceeds or other amounts actually received or (2) the net amount of Indemnity Payments actually received previously, in each case increased by any actual tax benefit derived by the

Indemnified Party as a result of such payment (with such tax benefit determined pursuant to Section 12.5(d)). The Indemnified Party agrees that the Indemnifying Party shall be subrogated to such Indemnified Party under any insurance policy.

(b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto, or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a "windfall" (i.e., a benefit he or she would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.

(c) If any Indemnified Party realizes a Tax benefit or detriment in one or more Tax periods by reason of having incurred an Expense or a Loss for which such Indemnified Party receives an Indemnity Payment from an Indemnifying Party (or by reason of the receipt of any Indemnity Payment), then such Indemnified Party shall pay to such Indemnifying Party an amount equal to the Tax benefit or such Indemnifying Party shall pay to such Indemnified Party an additional amount equal to the Tax detriment (taking into account, without limitation, any Tax detriment resulting from the receipt of such additional amounts), as the case may be. The amount of any Tax benefit or any Tax detriment for a Tax period realized by an Indemnified Party by reason of having incurred an Expense or a Loss (or by reason of the receipt of any Indemnity Payment) shall be deemed to equal the product obtained by multiplying (i) the amount of any deduction or loss or inclusion in income for such period resulting from such

Expense or Loss (or the receipt of any Indemnity Payment or additional amount), as the case may be without regard to whether such deduction or loss or such inclusion in income results in any actual decrease or increase in Tax liability for such period (with the amount of any deduction or loss or inclusion in income determined in accordance with Section 12.5(d) below), by (ii) the highest applicable marginal Tax rate for such period (provided, however, that the amount of any Tax benefit attributable to an amount that is creditable shall be deemed to equal the amount of such creditable item). Any payment due under this Section 12.5(c) with respect to a Tax benefit or Tax detriment realized by an Indemnified Party in a Tax period shall be due and payable within 30 days from the

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time the return for such Tax period is due, without taking into account any extension of time granted to the Party filing such return.

(d) Amounts paid by TSC to or for the benefit of eLoyalty, or by eLoyalty to or for the benefit of TSC, under this Article XII (and under other specified provisions of this Agreement) shall be treated by the Parties, for all applicable Tax purposes, as adjustments to the amount of Transferred Assets.

(e) In the event that an Indemnity Payment shall be denominated in a currency other than United States dollars, the amount of such

payment shall be translated into United States dollars using the Foreign Exchange Rate for such currency determined in accordance with the following rules:

(i) with respect to an Expense or a Loss arising from payment by a financial institution under a guarantee, comfort letter, letter of credit, foreign exchange contract or similar instrument, the Foreign Exchange Rate for such currency shall be determined as of the date on which such financial institution shall have been reimbursed;

(ii) with respect to an Expense or a Loss covered by insurance, the Foreign Exchange Rate for such currency shall be the Foreign Exchange Rate employed by the insurance company providing such insurance in settling such Expense or Loss with the Indemnifying Party; and

(iii) with respect to an Expense or a Loss not covered by clause (i) or (ii) above, the Foreign Exchange Rate for such currency shall be determined as of the date that notice of the claim with respect to such Expense or Loss shall be given to the Indemnified Party.

12.6. PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS. (a) If any third party shall make any claim or commence any arbitration proceeding or suit (collectively, a "Third Party Claim") against any one or more

of the Indemnified Parties with respect to which an Indemnified Party intends to make any claim for indemnification against eLoyalty under Section 12.2 or against TSC under Section 12.3, such Indemnified Party shall promptly give written notice to the Indemnifying Party describing such Third Party Claim in reasonable detail, and the following provisions shall apply. Notwithstanding the foregoing, the failure of any Indemnified Party to provide notice in accordance with this Section 12.6(a) shall not relieve the related Indemnifying Party of its obligations under this Article XII, except to the extent that such Indemnifying Party is actually prejudiced by such failure to provide notice.

(b) The Indemnifying Party shall have 20 business days after receipt of the notice referred to in Section 12.6(a) to notify the Indemnified Party that it elects to conduct and control the defense of such Third Party Claim. If the Indemnifying Party does not give the foregoing notice, the Indemnified Party shall have the right to defend, contest, settle or compromise such Third Party Claim in the exercise of its exclusive discretion subject to the provisions of Section 12.6(c), and the Indemnifying Party shall, upon request from any of the Indemnified Parties, promptly pay to such Indemnified Parties in accordance with the other terms of this Section

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12.6(b) the amount of any Expense or Loss resulting from their liability to the third party claimant. If the Indemnifying Party gives the foregoing notice, the Indemnifying Party shall have the right to undertake, conduct and control,

through counsel reasonably acceptable to the Indemnified Party, and at its sole expense, the conduct and settlement of such Third Party Claim, and the Indemnified Party shall cooperate with the Indemnifying Party in connection therewith, provided that (i) the Indemnifying Party shall not thereby permit any lien, encumbrance or other adverse charge to thereafter attach to any asset of any Indemnified Party; (ii) the Indemnifying Party shall not thereby permit any injunction against any Indemnified Party; (iii) the Indemnifying Party shall permit the Indemnified Party and counsel chosen by the Indemnified Party and reasonably acceptable to the Indemnifying Party to monitor such conduct or settlement and shall provide the Indemnified Party and such counsel with such information regarding such Third Party Claim as either of them may reasonably request (which request may be general or specific), but the fees and expenses of such counsel (including allocated costs of in-house counsel and other personnel) shall be borne by the Indemnified Party unless (A) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (B) the named parties to any such Third Party Claim include the Indemnified Party and the Indemnifying Party and in the reasonable opinion of counsel to the Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or likely conflicts of interest between them, in either of which cases the reasonable fees and disbursements of counsel for such Indemnified Party (including allocated costs of in-house counsel and other personnel) shall be reimbursed by the Indemnifying Party to the Indemnified Party; and (iv) the Indemnifying Party shall agree promptly to reimburse to the extent required under this Article XII the Indemnified Party for the full amount of any Expense or Loss resulting from such Third Party Claim

and all related expenses incurred by the Indemnified Party. In no event shall the Indemnifying Party, without the prior written consent of the Indemnified Party, settle or compromise any claim or consent to the entry of any judgment that does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a release from all liability in respect of such claim.

If the Indemnifying Party shall not have undertaken the conduct and control of the defense of any Third Party Claim as provided above, the Indemnifying Party shall nevertheless be entitled through counsel chosen by the Indemnifying Party and reasonably acceptable to the Indemnified Party to monitor the conduct or settlement of such claim by the Indemnified Party, and the Indemnified Party shall provide the Indemnifying Party and such counsel with such information regarding such Third Party Claim as either of them may reasonably request (which request may be general or specific), but all costs and expenses incurred in connection with such monitoring shall be borne by the Indemnifying Party.

(c) So long as the Indemnifying Party is contesting any such Third Party Claim in good faith, the Indemnified Party shall not pay or settle any such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such Third Party Claim, provided that in such event the Indemnified Party shall waive any right to indemnity therefor by the Indemnifying Party, and no amount in respect thereof shall be claimed as an Expense or a Loss under this Article XII.

If the Indemnified Party shall have undertaken the conduct and control of the defense of any Third Party Claim as provided above, the Indemnified Party, on not less than 30

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days prior written notice to the Indemnifying Party, may make settlement (including payment in full) of such Third Party Claim, and such settlement shall be binding upon the Parties for the purposes hereof, unless within said 30-day period the Indemnifying Party shall have requested the Indemnified Party to contest such Third Party Claim at the expense of the Indemnifying Party. In such event, the Indemnified Party shall promptly comply with such request and the Indemnifying Party shall have the right to direct the defense of such claim or any litigation based thereon subject to all of the conditions of Section 12.6(b). Notwithstanding anything in this Section 12.6(c) to the contrary, if the Indemnified Party, in the belief that a claim may materially and adversely affect it other than as a result of money damages or other money payments, advises the Indemnifying Party that it has determined to settle a claim, the Indemnified Party shall have the right to do so at its own cost and expense, without any requirement to contest such claim at the request of the Indemnifying Party, but without any right under the provisions of this Article XII for indemnification by the Indemnifying Party.

(d) To the extent that, with respect to any Claim (as defined

in the Tax Sharing Agreement) governed by Article V of the Tax Sharing Agreement, there is any inconsistency between the provisions of such Article V and of this Section 12.6, the provisions of Article V of the Tax Sharing Agreement shall control with respect to such Claim (as defined in the Tax Sharing Agreement).

12.7. PROCEDURES FOR INDEMNIFICATION OF DIRECT CLAIMS. Any claim for indemnification on account of an Expense or a Loss made directly by the Indemnified Party against the Indemnifying Party and that does not result from a Third Party Claim shall be asserted by written notice from the Indemnified Party to the Indemnifying Party specifically claiming indemnification hereunder. Such Indemnifying Party shall have a period of 30 business days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 30 business-day period, such Indemnifying Party shall be deemed to have accepted responsibility to make payment and shall have no further right to contest the validity of such claim. If such Indemnifying Party does respond within such 30 business-day period and rejects such claim in whole or in part, such Indemnified Party shall be free to pursue resolution as provided in Article XIII.

12.8. CONTRIBUTION. If the indemnification provided for in this Article XII is unavailable to an Indemnified Party in respect of any Expense or Loss arising out of or related to information contained in the Registration Statement or the Information Statement, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the

amount paid or payable by such Indemnified Party as a result of such Expense or Loss in such proportion as is appropriate to reflect the relative fault of the eLoyalty Indemnified Parties, on the one hand, or the TSC Indemnified Parties, on the other hand, in connection with the statements or omissions that resulted in such Expense or Loss. The relative fault of any eLoyalty Indemnified Party, on the one hand, and of any TSC Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission of a material fact relates to information about or supplied by the eLoyalty Business or an eLoyalty Indemnified Party, on the one hand, or about or by the Retained Business or a TSC Indemnified Party, on the other hand.

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12.9. REMEDIES CUMULATIVE. The remedies provided in this Article XII shall be cumulative and, subject to the provisions of Article XIII below, shall not preclude assertion by an Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

12.10. SURVIVAL. All covenants and agreements of the Parties contained in this Agreement relating to indemnification shall survive the Distribution Date indefinitely, unless a specific survival or other applicable period is expressly set forth herein.

ARTICLE XIII

DISPUTE RESOLUTION

13.1. AGREEMENT TO ARBITRATE. Except as otherwise specifically provided in any Operating Agreement, the procedures for discussion, negotiation and arbitration set forth in this Article XIII shall apply to all disputes, controversies or claims (whether sounding in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with, this Agreement or any Operating Agreement, or the transactions contemplated hereby or thereby (including all actions taken in furtherance of the transactions contemplated hereby or thereby on or prior to the date hereof), or the commercial or economic relationship of the Parties. Each Party agrees on behalf of itself and its respective Subsidiaries and Affiliates that the procedures set forth in this Article XIII shall be the sole and exclusive remedy in connection with any dispute, controversy or claim relating to any of the foregoing matters and irrevocably waives any right to commence any Action in or before any Governmental Authority, except as expressly provided in Section 13.7(b) and except to the extent provided under the Arbitration Act in the case of judicial review of arbitration results or awards. EACH PARTY ON BEHALF OF ITSELF AND ITS RESPECTIVE SUBSIDIARIES AND AFFILIATES IRREVOCABLY WAIVES ANY RIGHT TO ANY TRIAL IN A COURT THAT WOULD OTHERWISE HAVE JURISDICTION OVER ANY CLAIM, CONTROVERSY OR DISPUTE SET FORTH IN THE FIRST SENTENCE OF THIS SECTION 13.1.

13.2. ESCALATION AND MEDIATION. (a) The Parties agree to use

commercially reasonable efforts to resolve expeditiously any dispute, controversy or claim between them with respect to the matters covered hereby that may arise from time to time on a mutually acceptable negotiated basis. In furtherance of the foregoing, any Party involved in a dispute, controversy or claim may deliver a notice (an "Escalation Notice") demanding an in-person meeting involving representatives of the Parties at a senior level of management of the Parties (or if the Parties agree, of the appropriate strategic business unit or division within such entity). A copy of any such Escalation Notice shall be given to the General Counsel, or like officer or official, of each Party involved in the dispute, controversy or claim (which copy shall state that it is an Escalation Notice pursuant to this Agreement). Any agenda, location or procedures for such discussions or negotiations between the Parties may be established by the Parties from time to time; provided, however, that the Parties shall use commercially reasonable efforts to meet within 30 days of the

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Escalation Notice.

(b) The Parties must retain a mediator to aid the Parties in their discussions and negotiations by informally providing advice to the Parties. Any opinion expressed by the mediator shall be strictly advisory and shall not be binding on the Parties, nor shall any opinion expressed by the

mediator be admissible in any arbitration proceeding. The mediator shall be selected by the Party that did not deliver the applicable Escalation Notice from the list of individuals set forth on Exhibit I, the names of which individuals were supplied to the Parties by JAMS/Endispute. Costs of the mediation shall be borne equally by the Parties involved in the matter, except that each Party shall be responsible for its own expenses. Mediation is a prerequisite to a demand for arbitration under Section 13.3.

13.3. PROCEDURES FOR ARBITRATION. (a) At any time after the completion of the mediation required by Section 13.2(b) (the "Arbitration Demand Date"), any Party involved in the dispute, controversy or claim (regardless of whether such Party delivered the Escalation Notice) may, unless the Applicable Deadline (as hereinafter defined) has occurred, make a written demand (the "Arbitration Demand Notice") that the dispute be resolved by binding arbitration, which Arbitration Demand Notice shall be given to the Parties to the dispute, controversy or claim in the manner set forth in Section 15.9. In the event that any Party shall deliver an Arbitration Demand Notice to another Party, such other Party may itself deliver an Arbitration Demand Notice to such first Party with respect to any related dispute, controversy or claim with respect to which the Applicable Deadline has not passed without the requirement of delivering an Escalation Notice. No Party may assert that the failure to resolve any matter during any discussions or negotiations, the course of conduct during the discussions or negotiations or the failure to agree on a mutually acceptable time, agenda, location or procedures for the meeting, in each case, as contemplated by Section 13.2, is a prerequisite to a demand for arbitration

under this Section 13.3. In the event that any Party delivers an Arbitration Demand Notice with respect to any dispute, controversy or claim that is the subject of any then pending arbitration proceeding or of a previously delivered Arbitration Demand Notice, all such disputes, controversies and claims shall be resolved in the arbitration proceeding for which an Arbitration Demand Notice was first delivered unless the arbitrator in his or her sole discretion determines that it is impracticable or otherwise inadvisable to do so.

(b) Except as may be expressly provided in any Operating Agreement, any Arbitration Demand Notice may be given until one year and 45 days after the later of (i) the occurrence of the act or event giving rise to the underlying claim or (ii) the date on which such act or event was, or should have been, in the exercise of reasonable due diligence, discovered by the Party asserting the claim (as applicable and as it may in a particular case be specifically extended by the Parties in writing, the "Applicable Deadline"). Any discussions, negotiations or mediations between the Parties pursuant to this Agreement or otherwise will not toll the Applicable Deadline unless expressly agreed in writing by the Parties. Each Party agrees on behalf of itself and its respective Subsidiaries and Affiliates that if an Arbitration Demand Notice with respect to a dispute, controversy or claim is not given prior to the expiration of the Applicable Deadline, such dispute, controversy or claim will be barred. Subject to Section 13.7(d), upon delivery of an Arbitration Demand Notice pursuant to Section 13.3(a) prior to the Applicable Deadline, the

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dispute, controversy or claim shall be decided by a sole arbitrator in accordance with the rules set forth in this Article XIII.

13.4. SELECTION OF ARBITRATOR. (a) If the amount in dispute is less than $500,000, the mediator selected by the provisions set forth in Section 13.2(b) above shall also serve as the sole arbitrator. If the amount is dispute equals or exceeds $500,000, the mediator selected by the provisions set forth in Section 13.2(b) above shall select a sole arbitrator from a list provided by JAMS/Endispute. After selection of such sole arbitrator, the mediator shall have no further role with respect to the dispute. Any arbitrator selected pursuant to this paragraph (a) shall be disinterested with respect to any of the Parties and the matter and shall be reasonably competent in the applicable subject matter.

(b) The sole arbitrator selected pursuant to paragraph (a) above will set a time for the hearing of the matter which will commence no later than 90 days after the date of appointment of the sole arbitrator pursuant to paragraph (a) above, and such hearing will be no longer than 30 days (unless in the judgment of the arbitrator the matter is unusually complex and sophisticated and thereby requires a longer time, in which event such hearing shall be no longer than 90 days). The final decision of such arbitrator will be rendered in writing to the Parties not later than 60 days after the last hearing date,

unless otherwise agreed by the Parties in writing.

13.5. HEARINGS. Within the time period specified in Section 13.4(d), the matter shall be presented to the arbitrator at a hearing by means of written submissions of memoranda and verified witness statements, filed simultaneously, and responses, if necessary in the judgment of the arbitrator or both of the Parties. If the arbitrator deems it to be essential to a fair resolution of the dispute, live cross-examination or direct examination may be permitted, but is not generally contemplated to be necessary. The arbitrator shall actively manage the arbitration with a view to achieving a just, speedy and cost-effective resolution of the dispute, claim or controversy. The arbitrator may, in his or her sole discretion, set time and other limits on the presentation of each Party's case, its memoranda or other submissions, and refuse to receive any proffered evidence that the arbitrator, in his or her sole discretion, finds to be cumulative, unnecessary, irrelevant or of low probative nature. Except as otherwise set forth herein, any arbitration hereunder will be conducted in accordance with the JAMS/Endispute Streamlined Rules for Commercial, Real Estate and Construction Cases then prevailing. The decision of the arbitrator will be final and binding on the Parties, and judgment thereon may be had and will be enforceable in any court having jurisdiction over the Parties. Arbitration awards will bear interest at an annual rate of the Prime Rate plus 2% per annum. To the extent that the provisions of this Agreement and the prevailing rules of JAMS/Endispute conflict, the provisions of this Agreement shall govern.

13.6. DISCOVERY AND CERTAIN OTHER MATTERS. (a) Any Party involved in the applicable dispute may request limited document production from the other Party of specific and expressly relevant documents, with the reasonable expenses of the producing Party incurred in such production paid by the requesting Party. Any such discovery (which rights to documents shall be substantially less than document discovery rights prevailing under the Federal Rules of Civil Procedure) shall be conducted expeditiously and shall not cause the hearing provided for in Section 13.5 to be adjourned except upon consent of all of the Parties or upon an extraordinary

<PAGE> 51

showing of cause demonstrating that such adjournment is necessary to permit discovery essential to a Party to the proceeding. Depositions, interrogatories or other forms of discovery (other than the document production set forth above) shall not occur except by consent of all of the Parties. Disputes concerning the scope of document production and enforcement of the document production requests will be determined by written agreement of the Parties or, failing such agreement, will be referred to the arbitrator for resolution. All discovery requests will be subject to the Parties' rights to claim any applicable privilege. The arbitrator will adopt procedures to protect the proprietary

rights of the Parties and to maintain the confidential treatment of the arbitration proceedings (except as may be required by law). Subject to the foregoing, the arbitrator shall have the power to issue subpoenas to compel the production of documents relevant to the dispute, controversy or claim.

(b) The arbitrator shall have full power and authority to determine issues of arbitrability but shall otherwise be limited to interpreting or construing the applicable provisions of this Agreement or any Operating Agreement, and will have no authority or power to limit, expand, alter, amend, modify, revoke or suspend any condition or provision of this Agreement or any Operating Agreement; it being understood, however, that the arbitrator will have full authority to implement the provisions of this Agreement or any Operating Agreement and to fashion appropriate remedies for breaches of this Agreement (including interim or permanent injunctive relief); provided, however, that the arbitrator shall not have any authority in excess of the authority a court having jurisdiction over the Parties and the controversy or dispute would have absent these arbitration provisions. It is the intention of the Parties that in rendering a decision the arbitrator give effect to the applicable provisions of this Agreement and the Operating Agreements and follow applicable law (it being understood and agreed that this sentence shall not give rise to a right of judicial review of the arbitrator's award).

(c) If a Party fails or refuses to appear at and participate in an arbitration hearing after due notice, the arbitrator may hear and determine the controversy upon evidence produced by the appearing Party.

(d) Arbitration costs will be borne equally by each Party involved in the matter, except that each Party will be responsible for its own attorney's fees and other costs and expenses, including the costs of witnesses selected by such Party.

13.7. CERTAIN ADDITIONAL MATTERS. (a) Any arbitration award shall be a bare award limited to a holding for or against a Party and shall be without findings as to facts, issues or conclusions of law (including with respect to any matters relating to the validity or infringement of patents or patent applications) and shall be without a statement of the reasoning on which the award rests, but must be in adequate form so that a judgment of a court may be entered thereupon. Judgment upon any arbitration award hereunder may be entered in any court having jurisdiction thereof.

(b) Prior to the time at which an arbitrator is appointed pursuant to Section 13.4, any Party may seek one or more temporary restraining orders in a court of competent jurisdiction if necessary in order to preserve and protect the status quo. Neither the request for, nor the grant or denial of, any such temporary restraining order shall be deemed a waiver of the obligation to

<PAGE> 52

arbitrate as set forth herein, and the arbitrator may dissolve, continue or modify any such order. Any such temporary restraining order shall remain in effect until the first to occur of the expiration of the order in accordance with its terms or the dissolution thereof by the arbitrator.

(c) Except as required by law, the Parties shall hold, and shall cause their respective officers, directors, employees, agents and other representatives to hold, the existence, content and result of mediation or arbitration in confidence in accordance with the provisions of Article XIV and except as may be required in order to enforce any award. Each of the Parties shall request that any mediator or arbitrator comply with such confidentiality requirement.

(d) In the event that at any time the sole arbitrator shall fail to serve as an arbitrator for any reason, the Parties shall select a new arbitrator who shall be disinterested as to the Parties and the matter in accordance with the procedure set forth herein for the selection of the initial arbitrator. The extent, if any, to which testimony previously given shall be repeated or as to which the replacement arbitrator elects to rely on the stenographic record (if there is one) of such testimony shall be determined by

the replacement arbitrator.

13.8. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the Parties will continue to provide service and honor all other commitments under this Agreement and each Operating Agreement during the course of dispute resolution pursuant to the provisions of this Article XIII with respect to all matters not subject to such dispute, controversy or claim.

13.9. LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the provisions of this Article XIII, only insofar as they relate to the agreement to arbitrate and any procedures pursuant thereto, shall be governed by the Arbitration Act and other applicable federal law. In all other respects, the interpretation of this Agreement shall be governed as set forth in Section 15.2.

13.10. CHOICE OF FORUM. Any arbitration hereunder shall take place in Chicago, Illinois, unless otherwise agreed in writing by the Parties.

ARTICLE XIV

ACCESS TO INFORMATION AND SERVICES

14.1. AGREEMENT FOR EXCHANGE OF INFORMATION. (a) At all times from and after the Distribution Date for a period of ten (10) years, as soon as reasonably practicable after written request: (i) TSC shall afford to eLoyalty, its Subsidiaries and their authorized accountants, counsel and other designated

representatives reasonable access during normal business hours to, or, at eLoyalty's expense, provide copies of, all records, books, contracts, instruments, data, documents and other information (collectively, "Information") in the possession or under the control of TSC immediately following the Distribution Date that relates to eLoyalty, the eLoyalty Business or the eLoyalty Employees; and (ii) eLoyalty shall afford to TSC, its Subsidiaries and their authorized accountants, counsel and other designated representatives reasonable access

<PAGE> 53

during normal business hours to, or, at TSC's expense, provide copies of, all Information in the possession or under the control of eLoyalty immediately following the Distribution Date that relates to TSC, the TSC Business or the TSC Employees; provided, however, that in the event that either Party determines that any such provision of or access to Information could be commercially detrimental, violate any law or agreement or waive any attorney-client privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.

(b) Either Party may request Information under Section 14.1(a)

(i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities or tax laws) by a Governmental Authority having jurisdiction over the requesting party, (ii) for use in any other judicial, regulatory, administrative, tax or other proceeding or in order to satisfy audit, accounting, claims defense, regulatory filings, litigation, tax or other similar requirements, (iii) for use in compensation, benefit or welfare plan administration or other bona fide business purposes or (iv) to comply with its obligations under this Agreement or any Operating Agreement.

14.2. OWNERSHIP OF INFORMATION. Any Information owned by one Party that is provided to a requesting Party pursuant to Section 14.1 shall be deemed to remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed to grant or confer rights of license or otherwise in any such Information.

14.3. COMPENSATION FOR PROVIDING INFORMATION. The Party requesting Information agrees to reimburse the providing Party for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the requesting Party. Except as otherwise specifically provided in this Agreement, such costs shall be computed in accordance with the providing Party's standard methodology and procedures.

14.4. RETENTION OF RECORDS. To facilitate the possible

exchange of Information pursuant to this Article XIV after the Distribution Date, the Parties agree to use commercially reasonable efforts to retain all Information in their respective possession or control on the Distribution Date in accordance with the policies and procedures of TSC as in effect on the Distribution Date. No party will destroy, or permit any of its Subsidiaries or Affiliates to destroy, any Information that the other Party may have the right to obtain pursuant to this Agreement prior to the seventh anniversary of the date hereof, and thereafter without first using commercially reasonable efforts to notify the other Party of the proposed destruction and giving the other Party the opportunity to take possession of such Information prior to such destruction; provided, however, that in the case of any Information relating to Taxes, such period shall be extended to one year after the expiration of the applicable statute of limitations (giving effect to any extensions thereof).

14.5. LIMITATION OF LIABILITY. No Party shall have any liability to the other Party (i) if any Information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or that is based on an estimate or forecast, is found to be inaccurate, in the absence of

<PAGE> 54

willful misconduct by the Party providing such Information, or (ii) if any Information is destroyed after commercially reasonable efforts to comply with the provisions of Section 14.4.

14.6. PRODUCTION OF WITNESSES. At all times from and after the Distribution Date, each Party shall use commercially reasonable efforts to make available to the other Party (without cost (other than reimbursement of actual out-of-pocket expenses) to, and upon prior written request of, the other Party) its directors, officers, employees and agents as witnesses to the extent that the same may reasonably be required by the other Party in connection with any legal, administrative or other proceeding in which the requesting Party may from time to time be involved with respect to the eLoyalty Business, the Retained Business or any transactions contemplated hereby.

14.7. CONFIDENTIALITY. (a) From and after the Distribution Date, each of TSC and eLoyalty shall hold, and shall cause their respective directors, officers, employees, agents, consultants, advisors and other representatives to hold, in strict confidence, with at least the same degree of care that applies to TSC's confidential and proprietary information pursuant to policies in effect as of the Distribution Date, all non-public information concerning or belonging to the other Party or any of its Subsidiaries or Affiliates obtained by it prior to the Distribution Date, accessed by it pursuant to Section 14.1 hereof, or furnished to it by the other Party or any of its Subsidiaries or Affiliates pursuant to this Agreement or any agreement or

document contemplated hereby, including, without limitation, any trade secrets, technology, know-how and other non-public, proprietary intellectual property rights licensed pursuant to the Intellectual Property License Agreements and shall not release or disclose such information to any other Person, except its representatives, who shall be bound by the provisions of this Section 14.7; provided, however, that TSC and eLoyalty and their respective directors, officers, employees, agents, consultants, advisors and other representatives may disclose such information if, and only to the extent that, (i) a disclosure of such information is compelled by judicial or administrative process or, in the opinion of such Party's counsel, by other requirements of law (in which case the disclosing Party will provide, to the extent practicable under the circumstances, advance written notice to the other Party of its intent to make such disclosure), or (ii) such Party can show that such information (A) is published or is or otherwise becomes available to the general public as part of the public domain without breach of this Agreement; (B) has been furnished or made known to the recipient without any obligation to keep it confidential by a third party under circumstances which are not known to the recipient to involve a breach of the third party's obligations to a Party hereto; (C) was developed independently of information furnished to the recipient under this Agreement; or (D) in the case of information furnished after the Distribution Date, was not known to the recipient at the time of the Distribution but became known to the recipient prior to the time of receipt thereof from the other Party.

(b) Each Party acknowledges that the other Party would not have an adequate remedy at law for the breach by the acknowledging Party of any

one or more of the covenants contained in this Section 14.7 and agrees that, in the event of such breach, the other Party may, in addition to the other remedies that may be available to it, apply to a court for an injunction to prevent breaches of this Section 14.7 and to enforce specifically the terms and provisions of this Section. Notwithstanding any other Section hereof, the provisions of this Section 14.7 shall survive the Distribution Date indefinitely.

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14.8. PRIVILEGED MATTERS. (a) Each of TSC and eLoyalty agrees to maintain, preserve and assert all privileges, including, without limitation, privileges arising under or relating to the attorney-client relationship (which shall include without limitation the attorney-client and work product privileges), not heretofore waived, that relate to the eLoyalty Business and the Transferred Assets for any period prior to the Distribution Date ("Privilege" or "Privileges"). Each Party agrees that it shall not waive any Privilege that could be asserted under applicable law without the prior written consent of the other Party. The rights and obligations created by this Section 14.8 shall apply to all information relating to the eLoyalty Business as to which, but for the Distribution, either Party would have been entitled to assert or did assert the

protection of a Privilege ("Privileged Information"), including without limitation, (i) any and all information generated prior to the Distribution Date but which, after the Distribution, is in the possession of either Party; and (ii) all information generated, received or arising after the Distribution Date that refers to or relates to Privileged Information generated, received or arising prior to the Distribution Date.

(b) Upon receipt by either Party of any subpoena, discovery or other request that may call for the production or disclosure of Privileged Information or if either Party obtains knowledge that any current or former employee of TSC or eLoyalty has received any subpoena, discovery or other request that may call for the production or disclosure of Privileged Information, such Party shall notify promptly the other Party of the existence of the request and shall provide the other Party a reasonable opportunity to review the information and to assert any rights it may have under this Section 14.8 or otherwise to prevent the production or disclosure of Privileged Information. Each Party agrees that it will not produce or disclose any information that may be covered by a Privilege under this Section 14.8 unless (i) the other Party has provided its written consent to such production or disclosure (which consent shall not be unreasonably withheld), or (ii) a court of competent jurisdiction has entered a final, nonappealable order finding that the information is not entitled to protection under any applicable Privilege.

(c) TSC's transfer of books and records and other information to eLoyalty, and TSC's agreement to permit eLoyalty to possess Privileged

Information existing or generated prior to the Distribution Date, are made in reliance on eLoyalty's agreement, as set forth in Sections 14.7 and 14.8, to maintain the confidentiality of Privileged Information and to assert and maintain all applicable Privileges. The access to information being granted pursuant to Section 14.1, the agreement to provide witnesses and individuals pursuant to Section 14.6 and the transfer of Privileged Information to eLoyalty pursuant to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Section 14.8 or otherwise. Nothing in this Agreement shall operate to reduce, minimize or condition the rights granted to TSC in, or the obligations imposed upon eLoyalty by, this Section 14.8.

ARTICLE XV

MISCELLANEOUS

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15.1. ENTIRE AGREEMENT. This Agreement and the Operating Agreements, including the Schedules and Exhibits referred to herein and therein and the documents delivered pursuant hereto and thereto, constitute the entire

agreement between the Parties with respect to the subject matter contained herein or therein, and supersede all prior agreements, negotiations, discussions, understandings, writings and commitments between the Parties with respect to such subject matter.

15.2. CHOICE OF LAW AND FORUM. This Agreement shall be governed by and construed and enforced in accordance with the substantive laws (except for any otherwise applicable conflicts of law provisions) of the State of Illinois and the federal laws of the United States of America applicable therein, as though all acts and omissions related hereto occurred in Illinois. Any lawsuit arising from or related to this Agreement or any of the Operating Agreements shall be brought only in the United States District Court for the Northern District of Illinois or the Circuit Court of Cook County, Illinois. To the extent permissible by law, the Parties hereby consent to the jurisdiction and venue of such courts. Each Party hereby waives, releases and agrees not to assert, and agrees to cause its Affiliates to waive, release and not to assert, any rights such Party or its Affiliates may have under any foreign law or regulation that would be inconsistent with the terms of this Agreement as governed by Illinois law.

15.3. AMENDMENT. This Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each of the Parties.

15.4. WAIVER. Any term or provision of this Agreement may be

waived, or the time for its performance may be extended, by the Party or Parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if, as to any Party, it is in writing signed by an authorized representative of such Party. The failure of any Party to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, or in any way to affect the validity of this Agreement or any part hereof or the right of any Party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

15.5. PARTIAL INVALIDITY. Wherever possible, each provision hereof shall be interpreted in such a manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision or provisions shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such provision or provisions or any other provisions hereof, unless such a construction would be unreasonable.

15.6. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by and delivered to each of the Parties.

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15.7. SUCCESSORS AND ASSIGNS. (a) This Agreement and each Operating Agreement shall be binding upon and inure to the benefit of the Parties hereto and thereto, respectively, and their successors and permitted assigns; provided, however, that the rights of either Party under this Agreement and each Operating Agreement shall not be assignable by such Party without the prior written consent of the other Party. The successors and permitted assigns hereunder shall include, without limitation, any permitted assignee as well as the successors in interest to such permitted assignee (whether by merger, liquidation (including successive mergers or liquidations) or otherwise).

15.8. THIRD PARTY BENEFICIARIES. Except to the extent otherwise provided in Section 10.5 or Article XII hereof or in any Operating Agreement, the provisions of this Agreement and each Operating Agreement are solely for the benefit of the Parties and their respective Affiliates, successors and permitted assigns and shall not confer upon any third Person any remedy, claim, liability, reimbursement or other right in excess of those existing without reference to this Agreement or any Operating Agreement. Nothing in this Agreement or any Operating Agreement shall obligate TSC or eLoyalty to assist any eLoyalty Employee to enforce any rights such employee may have with

respect to any of the employee benefits described in this Agreement.

15.9. NOTICES. All notices, requests, claims, demands and other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered (i) when delivered personally, (ii) if transmitted by facsimile when confirmation of transmission is received, (iii) if sent by registered or certified mail, postage prepaid, return receipt requested, on the third business day after mailing or (iv) if sent by private courier when received; and shall be addressed as follows:

If to TSC, to:

Technology Solutions Company 205 North Michigan Avenue Suite 1500 Chicago, Illinois 60601 Attention: General Counsel Telecopy: (312) 228-4500 Facsimile: (312) 228-4501

If to eLoyalty, to:

eLoyalty Corporation 205 North Michigan Avenue Suite 1500

Chicago, Illinois 60601 Attention: Chief Financial Officer Telecopy: (312) 228-4500 Facsimile: (312) 228-4501

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or to such other address as such Party may indicate by a notice delivered to the other Party.

15.10. PERFORMANCE. Each Party shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party.

15.11. FORCE MAJEURE. No Party shall be deemed in fault of this Agreement or any Operating Agreement to the extent that any delay or failure in the performance of its obligations under this Agreement or any Operating Agreement results from any cause beyond its reasonable control and without its fault or negligence, including, without limitation, acts of God, acts of civil or military authority, embargoes, epidemics, war, riots,

insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay.

15.12. NO PUBLIC ANNOUNCEMENT. Neither TSC nor eLoyalty shall, without the approval of the other, make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that any such Party shall be so obligated by law or the rules of any stock exchange or quotation system, in which case the other Party shall be advised and the Parties shall use commercially reasonable efforts to cause a mutually agreeable release or announcement to be issued; provided, however, that the foregoing shall not preclude communications or disclosures necessary to implement the provisions of this Agreement or to comply with the accounting and SEC disclosure obligations or the rules of any stock exchange.

15.13. TERMINATION. Notwithstanding any provisions hereof, this Agreement may be terminated and the Distribution abandoned at any time prior to the Distribution Date by and in the sole discretion of the Board of Directors of TSC without the prior the approval of any Person. In the event of such termination, this Agreement shall forthwith become void and no Party shall have any liability to any Person by reason of this Agreement, except that TSC shall be liable for any costs and expenses, including attorneys' fees, incurred by eLoyalty or its Subsidiaries prior to or arising out of such termination.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their authorized representatives as of the date first above written.

TECHNOLOGY SOLUTIONS COMPANY

By: _____________________________________________ Jack Hayden [Title]

eLOYALTY CORPORATION

By: _____________________________________________ Kelly D. Conway President and Chief Executive Officer